CASH FLOW PROBLEMS
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Balancing payments terms and company cash flow
'The current economic. climate is having a negative impact on our family haulage business. Clients are looking for longer and longer payment terms. I can't afford to upset them, but still have to meet weekly fuel, wages and running costs. My bank is reducing lending and won't extend our current overdraft arrangements. Consequently we are sometimes in diffiadt cashflow situations, often because of late payment of our invoices. This is bound to happen again so we need aflexible financial arrangement in place to help us now and in the future" GO, Vilgan
MANY SMALL AND medium-sized enterprises in the road haulage industry continue to suffer severe cashflow problems, however prudent their approach to financial management. Settlement times, already some of the longest in Europe, typically stretch beyond 30, to 60 and even 90 days, with large companies frequently among the slowest payers. This may be the time to consider invoice financing: many firms offer this and similar such services (type the term into an internet search engine).
This method of improving cashflow also known as debtor finance involves selling accounts receivable to a third party at a discount in return for immediate funds to finance the everyday business. It's not a loan. because the money advanced is secured by the asset of the invoice. It differs from factoring in being a confidential service whereby clients still deal directly with the haulier. The business gets access to the value of the invoice as soon as it's submitted to the finance company rather than waiting until the customer is ready to pay.
When it works well, invoice financing can resolve cashflow issues, reduce worry and increase business optimism by providing the financial liquidity and flexibility to react to a changing market.