Staying liquid

Written on the 13 May 2009

WITH pressures on SMEs growing daily as major lenders tighten credit criteria, Cash Flow Finance says businesses must try to avoid late payments.

Managing director Wayne Smith, says he has seen an increase in business failures and creditors taking longer to pay and using ‘disputes’ as a tactic to stall on payments with serious cash flow implications.

"As an example, a business turning over $5 million which has debtors taking an average of 50 days to pay will have a receivables ledger of $685,000. If those debtors took an extra 15 days to pay the ledger would increase to $893,000 which would create a hole in the working capital of $208,000." says Smith.

"A logical response might be to slow down on payments to creditors but that isn’t always possible and with payables ledgers typically being 30 per cent to 50 per cent lower than receivables, taking an extra 15 days credit off suppliers may only recoup around $125,000," he says.

Typical responses range from negotiating an increased credit line to running up unauthorised borrowings or arrears with the Australian Tax Office (ATO).


Latest News

CROMWELL TRADES STEADILY IN FIRST HALF

CROMWELL Property Group has maintained a steady operating profit at $0.045 per security in the first half of FY17,...

WHY NEXTDC'S STOCK IS SOARING

AFTER posting its interim result, NEXTDC (ASX: NXT) gained more than 12 per cent on the stock market before noon.
...

PWR PROFIT CRASHES AS DOLLAR RISES AND COSTS MOUNT

A RISING Aussie dollar has offset PWR Holdings Limited's (ASX:PWH) overseas growth in the last half, forcing a...

SUPER RETAIL GROUP RESULTS SHINE ACROSS THE BOARD

A WELL-planned and executed half has paid off for Super Retail Group (ASX:SUL) as it posts a net profit result up ...

Related News

EVERYTHING YOU NEED TO KNOW ABOUT THE NATIONAL BROADBAND NETWORK

THE National Broadband Network (NBN) is more than an internet connection, it is an opportunity to transform your b...

WHY EMPLOYEE-OWNED COMPANIES ARE BEATING ASX200 SHARE PRICES

EMPLOYEE-owned companies command a higher share price than their publicly listed peers, reaping a 17 per cent prem...

RISE OF THE MACHINES HAS WORKERS SWEATING

UP TO 3.8 million Australian workers are fearful their job may soon be terminated by a robot, a new survey has shown....

LESS TALK, MORE SMALL BUSINESS ACTION IN 2017

THE future growth and prosperity of Australian SMEs could be undermined if governments lose sight of the sector...

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter