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

HOW WEDDING WOES INSPIRED A BOOMING BUSINESS FOR MEGAN ZIEMS

WHEN she was dress shopping for her wedding in 2010, Megan Ziems (pictured left) was disappointed to discover a ma...

SPOTLESS REJECTS DOWNER'S 'HOSTILE' $1.2B BID AS IT PROMISES A STRATEGY RESET

CLEANING and catering services company Spotless has rejected a $1.26 billion takeover bid from mining services firm D...

EXCLUSIVE INTERVIEW: MEGAPORT CEO VINCENT ENGLISH ON GLOBAL EXPANSION AND HOW TO SCALE UP A BUSINESS

THE RAPID expansion of Megaport (ASX: MP1) continues with the Brisbane-based company announcing a major partnership d...

BRISBANE ENTREPRENEUR BREAKS BARRIERS IN ECO-BUSINESS

TRACEY Bailey believes that if every person understood the true social and environmental cost of every product the...

Related News

FURNITURE DISRUPTOR SET TO SHARE HIS ONE OF A KIND BUSINESS MODEL

IT'S no secret that Australians love homemaking. Their ceaseless quest to create the perfect place to call hom...

WEEDING OUT THE ASX'S BURGEONING CANNABIS TREND: 8 COMPANIES TO WATCH

A NICHE is budding on the ASX in the form of medical cannabis, an industry which has been on the country's rad...

FRESH CLASS ACTION TO REVEAL ANOTHER SIDE OF SLATER AND GORDON DOWNFALL

ACA LAWYERS has issued a formal letter of demand to Andrew Grech (pictured), managing director of Slater and Gordo...

STARSHIPS WERE MEANT TO DELIVER DOMINO'S PIZZA

NICKI Minaj may have been off the mark when she declared 'starships were meant to fly'. However, she m...

EVENTS COMING UP

 

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter