- Posted by Duografik
- On October 15, 2019
- 0 Comments
- accounts receivable finance, businessexample, cashflow finance, customer invoice finance, debtor finance, factoring, invoice finance, transport, wholesalesupply
Businesses in the transport and logistics sector face many challenges trying to manage and maintain consistent cashflow having to juggle fluctuating fuel prices, tight margins, reducing numbers of skilled drivers, and ever-increasing regulation and safety obligations.
Adding to the strain is the broader business issues of credit accessibility from mainstream funding sources and Customers pushing out trade payments which remain at around 56+ days. As a result, all transport operators from interstate road freight, to local transport taxi trucks and couriers all have to adopt a variety of efficiency measures across the board including some more unpopular measures such as fuel surcharges, to maintain profitable margins and consistent cashflow.
Recently, an interstate operator with a fleet of six trucks requested assistance from AddCash Finance to help maintain cashflow after allowing his ATO obligations to build up. Cash normally available to pay taxes was instead used to purchase new trucks and employ drivers for new contracts. With tight margins and fuel credit limited, all cash was being committed to meeting their increased expenses. The problem was exacerbated by slow paying debtors and a 3% early payment discount was offered to try and encourage a better payment regime, which was taken by a significant number of debtors, even when they didn’t pay early. This eroded almost the entire margin.
AddCash Finance provided a debtor finance facility that raised $230,000 against the existing debtor’s ledger, which allowed a lump sum of $80,000 to be paid to the ATO and workable repayment arrangement agreed to with the ATO. The overdue creditors and superannuation were brought up to date whilst removing the early payment discount.
Selling on credit terms essentially means that control over cash inflows rests with your clients, which may see your company relying on costly early settlement discounts, even when your company isn’t to blame for cashflow management problems.
A Customer Invoice Finance company such as AddCash Finance allows the business to more effectively capitalise on early payment and bulk discounts from fuel suppliers avoiding the peaks in the pricing cycle. Advanced access to cash minimises the risk of accumulating problematic debt elsewhere like unpaid taxes and super. Offering flexibility unlike traditional finance products which are often secured against real estate, debtor finance facilities leverage unpaid Customer invoices commonly referred to as Accounts Receivables. Credit limits grow automatically in line with sales and therefore funding is better aligned to the working capital needs of the business without the proprietor needing to risk personal assets.
Interesting link: truck-driver-shortage-the-road-to-an-economic-roadblock