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Romain Dancre

Credit: Romain Dancre

Invoice payment woes? Try debtor finance

As the new financial year unfolds, small and medium enterprises (SMEs) across Australia face a significant hurdle threatening their growth and stability: delayed invoice payment. 

A leading non-bank business lender, Moneytech, has identified this as a pressing issue, driven by uncertainties in economic conditions, supply chain disruptions, escalating material costs, and limited access to additional funds. According to the Australian Bureau of Statistics, these factors have caused a slowdown in general business activity, amplifying the impact on SMEs by further impeding their cash flow.[1]

Cash flow management is proving to be a pressing concern for SMEs, with delayed invoice payments becoming a major impediment to their operations. Even with payment terms stretching to 90 or 120 days, SMEs are now facing extended delays in receiving their dues. As a result, their cash flow is severely constrained, affecting their ability to pay suppliers, invest in growth opportunities, and even meet essential expenses like salaries.

Nick McGrath, the CEO of Moneytech, expressed concern over the challenges faced by SMEs, stating, “These conditions are strangling SMEs. Our internal research indicates that SME owners are increasingly preoccupied with chasing invoice payments to maintain cash flow, becoming a primary concern before seeking additional financial products.”[2]

To address the issue of slow invoice payment and facilitate cash flow improvement for SMEs in the financial year 2023-2024, businesses can adopt a two-fold approach. First, tightening their internal processes can expedite payment collection. Second, seeking external assistance in the form of financial products, such as debtor finance, can provide much-needed relief.

Debtor finance emerges as a viable solution to alleviate SMEs’ cash flow issues. This financial product enables businesses to unlock the value of their outstanding invoices by accessing up to 100% of the invoice amount as soon as it is raised, rather than waiting for extended payment periods of 90 or 120 days. By leveraging debtor finance, SMEs can manage cash flow more efficiently, meet financial obligations, and capitalize on growth opportunities. Moneytech, with its straightforward and simplified approach to business lending, aims to empower SMEs to invest in their business growth and development.[3]

Moreover, SME operators facing cash flow constraints often find themselves resorting to personal savings or even mortgaging their homes to cover business expenses. Moneytech stands out by typically not requiring security against primary places of residence, allowing business owners to safeguard their personal assets while ensuring a clear separation between business and personal finances.

In light of the current challenges, Nick McGrath shares valuable insights for SME owners to proactively navigate the new financial year and overcome potential cash flow hurdles:

1. Assess Finance: Engage an independent accountant to conduct a comprehensive analysis of the business’s finances. Strategic budgeting can be instrumental in predicting the financial implications for the upcoming year and identifying growth opportunities. This budget should encompass financial forecasts, including profit and loss, balance sheet, and cash flow statements.

2. Reassess Strategic Plan: Review both short-term and long-term business goals to evaluate the existing strategy and ensure alignment. Conduct situational and SWOT analyses, leveraging customer feedback to develop solutions that cater to customer needs. Maintaining a flexible plan will enable businesses to adapt to environmental changes and seize potential opportunities.

3. Utilize a Sustainable Cash Flow Option: For SMEs grappling with cash flow challenges, exploring immediate and long-term support options is crucial. Moneytech’s trade and debtor finance solution liberates cash flow tied up in outstanding invoices, redirecting it towards staff wages, equipment, or stock. A testament to its efficacy, Drive Personnel, a specialist labour hire company in the construction industry, has successfully employed debtor finance from Moneytech to cover weekly wages while awaiting salary invoice payments from larger corporations. The approach has significantly improved their cash flow and opened up new opportunities for business growth.

In the face of delayed invoice payment, proactive planning, coupled with the adoption of debtor finance solutions, can empower Australian SMEs to surmount cash flow challenges and stride confidently into a successful new financial year. As they fortify their financial resilience, SMEs can focus on innovation, expansion, and customer satisfaction, ensuring a thriving and sustainable business future.

“Since starting, Drive Personnel has experienced consecutive years of 50 per cent growth,” said Josh. “In our first year, our existing lending facility wasn’t equipped to deliver what we needed. Moneytech has helped our business grow significantly, specifically in our time management, payroll compliance and hired staff’s salary payment.”

Josh, who otherwise can be waiting up to 120 days for invoice payment, is at the mercy of good cash flow to ensure his direct labour hires are paid on time every week. Rather than dip into his personal savings and mortgage to cover the shortfall, Josh’s debtor finance can be accessed as and when he needs it and paid-down as he goes rather an paying a lump sum at the end of each month. 

For mor information visit www.moneytech.com.au
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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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