Five SME finance tips for 2018
Is sound cash flow management high on your organisation’s agenda for next year? Here are five top tips for keeping your business finances healthy during 2018 and beyond.
1. Revise the credit terms on your sales
Your customers are in the same boat as you, looking to keep cash in their businesses for as long as possible. It’s likely that your customers have asked (or simply expect) you to wait 30, 60, 90 or even 120 days after invoice date before they pay these accounts.
Of course, you may have to offer them these generous credit sales terms to maintain a competitive advantage. But if your customers are willing to pay within 30 days or less, you’ll be in a much better cash position. Why not set up a few meetings this side of the year (or early next year) to discuss your credit sales terms for 2018?
2. Negotiate more favourable payment terms with your suppliers as well
Another way to keep cash in your business for longer is to lengthen your payment terms with your suppliers. If you’ve invested time and energy building strong working relationships with your suppliers, you’ll be in a better position to broach the subject. And make sure to kick-off this negotiation well in advance. Don’t ask when you really need the cash. Rather give your suppliers time to think about it without putting too much pressure on them.
3. Prepare for unexpected expenses
Do you have a clear strategy in mind for weathering unforeseen expenses without running out of working capital? Should business-critical equipment break down or bad weather damage your stock, how would you pay your suppliers, never mind your salaries? Maintaining a healthy cashflow is the smartest way to prepare for the unknown and keep your business running optimally come what may (within reason, of course). But how do you achieve this?
4. Review your business finance strategy
If you need working capital to invest in new equipment or technology, take advantage of a once-in-a-lifetime business opportunity, or survive a cash flow crunch – what funding avenues would you explore?
Many companies approach the big banks as their first port of call because they’re simply not aware or familiar with the other options available to them. However, there’s a faster and more flexible solution for small and growing businesses – known as factoring. This is a financial strategy used by a wide range of businesses around the world, from SMEs to large corporations. With factoring, you sell your accounts receivable to a factoring company, in exchange for a percentage of the cash that’s owing on the invoices. The factoring team takes over the responsibility of collecting payments directly from your customers.
Once the factor receives payment from a customer in accordance with your invoice terms, your business receives the balance owing on the invoice minus an agreed fee. The beauty of factoring is that it frees up working capital without you having to compromise equity or control. The factoring facility also grows with your business, because it is based on your accounts receivable (and not capped like a loan or overdraft).
5. Call in expert support when you need it
The administration of your credit sales ledger can be a time-consuming process, especially if you – as the business owner – must handle this role personally due to limited resources. So how do you avoid wasting time on credit control processes and invoice collections that could be better spent growing your business? And how do you be sure that your credit checks and payment controls are being handled in the best possible way? With a factoring solution, all these tasks are taken care of!
Choose Merchant Factors as your factoring partner and a team of trained credit control professionals will handle everything from opening new debtors' accounts and performing world-class credit checks, to following up payments and assisting in the settling of disputed accounts. All these services are carried out transparently, in close consultation with you – as part of the factoring agreement.
Why Merchant Factors?
Merchant Factors was founded in 1988 to offer growing businesses an alternative to traditional bank loans. Since then, the firm has successfully assisted over 2000 businesses in reaching their financial dreams.
As the only truly independent debtor finance institution in South Africa, Merchant Factors is not only flexible, but also fast – offering the shortest turnaround time in the industry from application to pay-out.
Ready to join 2000+ businesses, who are achieving their financial goals through factoring? For fast, flexible finance – contact Merchant Factors today
Finance beyond the Numbers.