In Business, Cash is King

Posted by Paul Ryan • 8 May 2015 • Tags:

The most challenging aspect of owning a business is being able to generate the cashflow to keep the doors to operate a sustainable busienss.

The well known phrase such as “Cash is King” refers to the importance of a business having a healthy financial position.

A lack of cashflow will not only stifle the health of a business but it will also test the energy levels and confidence of any business owner.

So many businesses have fought through the pain barrier, done the hard yards and yet it only takes a piece of equipment to break down or a customer not paying an invoice on time to create a bout of indigestion for the business owner and managers.

How can a business mitigate against such risks and what options do they have to maintain business momentum

As with the significant development of the home loan industry over the past 15 – 20 years the non bank lending options for business finance, asset and leasing finance and invoice finance has grown dramatically.

For many years business finance was the domain of the banks, well not any more. Let’s have a look at some of the opportunities for business finance.

Equipment Finance – the ability to lease, hire purchase equipment such as motor vehicles, tractors, machinery has been around for many years. However you would be surprised how far the equipment finance extends to these days.

Many business owners are looking to save money on their energy costs and looking for an energy efficient upgrade. There are now leasing options available that include solar, lighting and even light bulbs that you can finance or rent over a couple of years on monthly payments that help preserve your cashflow.

Other examples of what you can obtain equipment finance for include; air conditioning units, office fit outs, digital point of sales equipment, laptops, audio visual equipment just to name a few.

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Invoice Finance – invoice finance comes in many forms and can include debtor finance, invoice finance or trade finance.

It allows a business owner to receive a percentage of their outstanding invoices upfront so that they can manage their cashflow, continue to grow and not have to wait 30,60 or 90 days for their client to make the full payment.

Let’s say, you purchase your goods for say 50,000 and have sales to retail outlets totalling $120,000 with varying terms between 60 and 90%. Having to wait for the retails outlets to pay their invoices may cause problems for your cash flow in that you then can’t afford to fund the next purchase and continue to grow.

Business Finance can also include sale on lease back, operating leases, novated leases, agribusiness and any other type of commercial finance that can help your business grow.

The key to preserving your cashflow is to establish your options and to understand the tax implications to yurt business. It is recommended you seek advice from your accountant to under the tax implications to any finance structure you may be contemplating or introduced to An experienced and qualified finance and mortgage broker can help you through the process as well.

Author; Paul Ryan is the Executive Director of intouch Finance