How your small business clients struggling to balance the books can get back on their feet
FactorONE provides fast cash flow assistance to SMEs and general manager and former chair of the Debtor and Invoice Finance Association of Australia, Greg Charlwood lists five easy steps small businesses can take to combat financial issues.
1. Identify the problem
• Cashflow – if a business gets into difficulty, usually they are not properly managing cash flow. A B2B must actively chase debts and have an effective cash flow finance facility.
• Inadequate reporting systems - do the owners really know what is going on?
• Poor management - are the key staff in the business up to the task?
• Structure - is the business overstaffed or with too many locations?
2. Accept reality
• Business owners rarely see the writing on the wall. Trusted advisors play an important role in giving a good dose of hard truth and outlining action steps to take.
• With suppliers, it is better to be honest and to ask in advance for longer payment terms rather than just paying them late.
3. Develop a concise plan that has very clear and measurable objectives
• One of the key areas to look at is margin, which is often the main problem.
• Consider pushing prices up – often a small increase will greatly enhance the bottom line without much impact on your customer.
4. Find supportive funders
• Some bank and non bank funders are more supportive of turnaround.
• Consider factoring and get a facility in place early in case the informal turnaround doesn’t meet all of their objectives.
5. Consider a turnaround specialist
• There are many quality turnaround firms in Australia and engaging one greatly enhances the chances of successfully navigating the process.
• Select the right person. Check the qualifications and reputation of the practitioner. Membership of ARITA or the TMA should be a prerequisite.
Greg Charlwood is the former chair of the Debtor and Invoice Finance Association of Australia and general manager at FactorONE.
1. Identify the problem
• Cashflow – if a business gets into difficulty, usually they are not properly managing cash flow. A B2B must actively chase debts and have an effective cash flow finance facility.
• Inadequate reporting systems - do the owners really know what is going on?
• Poor management - are the key staff in the business up to the task?
• Structure - is the business overstaffed or with too many locations?
2. Accept reality
• Business owners rarely see the writing on the wall. Trusted advisors play an important role in giving a good dose of hard truth and outlining action steps to take.
• With suppliers, it is better to be honest and to ask in advance for longer payment terms rather than just paying them late.
3. Develop a concise plan that has very clear and measurable objectives
• One of the key areas to look at is margin, which is often the main problem.
• Consider pushing prices up – often a small increase will greatly enhance the bottom line without much impact on your customer.
4. Find supportive funders
• Some bank and non bank funders are more supportive of turnaround.
• Consider factoring and get a facility in place early in case the informal turnaround doesn’t meet all of their objectives.
5. Consider a turnaround specialist
• There are many quality turnaround firms in Australia and engaging one greatly enhances the chances of successfully navigating the process.
• Select the right person. Check the qualifications and reputation of the practitioner. Membership of ARITA or the TMA should be a prerequisite.
Greg Charlwood is the former chair of the Debtor and Invoice Finance Association of Australia and general manager at FactorONE.
