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Question: How can I minimise the impact of
payment delays and ensure the liquidity of my business in light of
the current financial storm?
1st March 2009
Harry Parkinson, Managing Director of Close Invoice Finance
in Ireland.
Increasingly businesses, both large and small, are finding themselves under
threat by extended payment terms and wondering how they can possibly stay afloat
in these difficult economic times. The number of days that large firms take to
pay an invoice has increased from 81 to 88 since June*, with some even
predicting this could rise to more than 100 days during 2009.
Corporate giants are taking longer to pay their small suppliers, and the fact is
that some businesses are going to have difficulty in financing their short-term
debt. Banks aren’t helping, with their expensive overdrafts and loans, not to
mention an unmistakeable tightening in their lending criteria, and so I would
urge companies who are struggling to consider alternative methods of borrowing,
if they haven’t already done so.
Invoice finance is becoming an increasingly attractive option – and in some
cases the only option - for small and medium sized enterprises, proving an
excellent solution to overcome their funding challenges. Simply put, invoice
finance works when a company sells its unpaid invoices and in return receives
immediate payment of up to 95 per cent of the worth of those unpaid bills. The
beauty of it is that businesses have instant access to cash flow and if
necessary we chase the payment of the debt leaving them to get on with the
running of their business.
Small enterprises in particular are traditionally vulnerable to financial
downturns because they operate on tight margins, but that’s not to say that
larger companies are immune. My advice would be for all businesses to review
their financial requirements, especially those with financing arrangements that
will need to be renegotiated in the next 18 months. Companies that adopt a
wait-and-see approach face the greatest risk. Businesses need to refinance early
to ensure their liquidity.
Article featured in
Belfast Telegraph Business Clinic
