Preventive care for your business’ cashflow crises

By November 22, 2016 Blog, Business help No Comments
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Budgets are tricky to manage because costs can get out of control surprisingly quickly. That’s often because we don’t budget for just how expensive problems that might appear relatively minor at first can turn out be. Setbacks don’t normally happen one at a time. One problem often creates several more, eventually cascading into a mess that can break a well planned budget entirely.

protection in case of a problem

For example, a late payment by a client might disrupt your cash flow enough to cause purchasing delays that prevent progress on multiple other projects. That, in turn, could put pressure on workers and clients, which can result in even more complications. The key to avoiding these kinds of problems is thinking ahead, and taking preventive measures that can protect you from cascading effects.

Identify critical areas

In order to prevent this kind of ripple effect, it’s important to identify specific bottlenecks that can’t be allowed to suffer due to cash flow problems. Those could be just about anything depending on your industry and specific business, but a few examples might be…

●     Critical resource purchases

●     Wages

●     Large irregular expenses

●     Utility and Tool Maintenance Fees.

These costs need to be prioritised and tracked very carefully, because they are critical in facilitating the success of everything else your business does. By tracking and being fully aware of their status as critical factors, you’ll be able to discern exactly when you need to take extraordinary measures to deal with a cash flow disruption in order to avoid a more serious problem.

Plan ahead to accommodate cash flow problems

Conventional wisdom and home economics would dictate that you should simply save some money for a rainy day, but that doesn’t necessarily apply to your business. Not only would it often be difficult or impossible to get extra funds for this purpose, small businesses also need to use any liquid capital they have to react to growth opportunities and improve their services in order to compete. Taking these risks is a critical part of sustaining healthy growth.

The right way to plan ahead for this kind of issue isn’t about holding on to liquid capital, but rather about setting up financing options ahead of time that can alleviate financial stress when necessary. The most important issue with doing this is ensuring that you can get access to those funds immediately when you need it. A business loan won’t be of much use if you have to wait a month to get access to the funds. Because of this, it’s particularly important to build a personal one to one relationship with a financial institution that’ll work with you to get you the right kind of financing.

Get the right kind of financing

Unlike larger institutions, Fifo Capital specialises in relationship-based financing for small and medium sized businesses and always provides a 24-hour turnaround on applications for all our financing services. That is, in part, what makes us such a great option for dealing with these kinds of problems. There are a variety of different options that might be right for you, and our representatives work with you to really understand your business so that you get access to the best financing options for your particular situation. Some common solutions would include…

Invoice financing

If you’re dealing with client payment issues, a great way to nip it in the bud is to use invoice financing. Using this service, you’ll simply sell an invoice to your financial institution for most of its value. You’ll get your money immediately, and the financial institution collects the payment from the client at the time that it’s due. This kind of financing is secured against the invoice itself, so you don’t have to tie down any other assets.

Business loans

Fifo Capital’s Business loans are a great option when you need a more significant amount of money in short order. Like with all of our financing options, you’ll get access to your funds quickly, however these types of loans are typically secured. That means you’ll need to be able to provide invoices, stock, or some other kind of collateral.

Standby facilities

In terms of planning ahead, standby finance facilities are a perfect option for any small business. Standby facilities are loans that are negotiated whenever you like, and then held in reserve. You can take the time to do your research and negotiate the loan from a position of strength, instead of doing so when you’re under a major time crunch. After it’s set up, you don’t have to ever draw on the funds unless you actually need them, and aren’t responsible for any interest payments on that loan unless you actually make use of it.

Preventing a budget crisis is all about understanding your business, building a great relationship with your financial institution, and planning ahead to deal with those cash flow crises before they have a chance to wreak havoc on your operation. Give us a call today to chat with one of our representatives about how we can help you protect your business!

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    Fifo Capital understands time is critical when it comes to managing your cash flow – so our process is aimed to be as simple as possible.
    A Fifo Capital facility approval typically takes around 24 hours to set-up and depending on the required information supplied by customers, transfer of funds can take place in as little as four hours.

    The following covers the terms and conditions required for a four hour funds transfer to take place;

    1. Fifo Capital will tell the proposed client if the application is successful to receive funding. We can accept or reject the application at our sole and absolute discretion. If we accept the application the cash flow finance services will be provided solely in accordance with the documents we agree with the proposed client.
    2. Fifo Capital reserves the right to reject previously approved applications without notice and/or consultation.
    3. Fifo Capital’s application consists of a number of forms, however, not limited to fully completed and signed; Application, Receivables Finance Facility Terms and Conditions, Guarantee, Offer to Sell, and Privacy Consent forms
    4. To be eligible for a four hour funds transfer in relation to an approved application, the proposed customer must request or apply to Fifo Capital in writing before 12noon on the same business day. Such a request doesn’t guarantee the transfer will take place or funds cleared in the customer’s bank account within the four hour period.
    5. Should a four hour funding transfer request be approved, such a transfer can only be facilitated on a business day. A transfer request is not available on public or bank holidays, or weekends.
    6. Four hour funding transfers may incur a fee as detailed within the application.
    7. Fifo Capital’s aligned banks or financial institutions have the right to reject a four hour funding transfer request. Fifo Capital and its aligned banks are not liable for any loss or damages resulting from a funding transfer request not taking place or funds being cleared within a four hour period.
    8. Fifo Capital is a franchise business operation. Fifo Capital UK Ltd is the master franchisee and is therefore not responsible for the actions or inactions of its franchisees in relation to any funds transfer timing.
    9. Fifo Capital is not responsible for any loss or damages incurred or to be incurred by the would be or existing customer should a transfer not take place within or cleared funds not be received within a four hour period.

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