Using Debt Factoring to Survive the Economic Slump
Its now a blatant fact that the United Kingdom Economy is in a downturn and Company Directors interested in their Companies existence must have a plan or they will most certainly go into liquidation
The difficult trading conditions over the Christmas and New Years holiday season saw a record level of shops go bust
The following stores and Companies, to name a few, have gone into administration. Wedgewood the fine China and tableware manufacturer has gone along with Savvi, USC the Fashion store and MFI the furniture retailer.
Possible one of the most high profile causalities of the economic collapse has been woolworths that went into administration in December 2007 and finally closed all retail outlets in January which has put 27,000 out of work.
How can a business survive this recession? Well Alan Tilley of the Turnaround Management Association says that for a business to achieve a successful turnaround it needs four things; a viable business core, credible management team, a valid business plan and appropriate finance.
The credit crunch and lack of liquidity within the financial money markets has restricted traditional forms of lending from Banks into Businesses to very dangerous levels. This limitation of funding has implemented a Cash Flow Squeeze on British Business.
As a business owner one of the first things you should do to survive a recession is cut costs. Carefully review expenditure to identify any areas of your business where savings can be made. Look at transport costs, advertising, marketing, business location and even the simplest things such as turning off the office lights at the end of the working day. Simple measures can give rise to immediate benefits for little or no pain.
Cash Flow within a business is vital at any time but even more so in a recession and having access to working capital should be at the top of any business owners list. Funding a business with invoice factoring, which is increasingly popular for small to medium businesses. While not suitable for all Companies, the huge benefit of invoice factoring is that rather than have money tied up in invoices that are yet to be paid, you can receive an initial payment up front, typically 80% – 85% of the gross value, and the remainder when the customer pays the invoices to an invoice finance provider, less the service fee which has been negotiated with them. However, if the customer defaults on payment, then the finance company will recover the money provided to you initially from any further invoices which are factored. This can lead to random cash flow if customers are poor payers or they go into insolvency.