Invoice Finance and Factoring has become the tool of choice to help turnaround specialists in their work with fast growth and troubled businesses, according to Michael Fingland, managing director of award-winning turnaround specialist Vantage Performance. Michael says turnaround and debtor finance firms work in the same space – supporting high growth and startup businesses as well as those going through tough times. They might seem at opposite ends of the business spectrum but the common denominator is that they are short of cash and it's paramount for them to quickly free up working capital.
I believe debtor finance is becoming the tool of choice for turnaround firms because it is an incredibly flexible form of funding that can make a very fast impact on the financial health of the business. Small business owners also like it because invoice finance grows with the business, and they do not have to dilute equity to improve working capital or achieve successful debt restructuring.
The Turnaround Management Association recently stressed the importance of businesses addressing fast growth or poor cashflow earlier rather than later. Vantage Performance and FactorONE are encouraging the growing number of SMEs who have fallen behind with ATO payments to act quickly on finding turnaround and cash flow solutions.
If your business is getting progressively further in arrears with the ATO or suppliers, don’t wait until it’s too late - seek help and start charting your course back to a successful business. When businesses end up difficulties they often leave it too late. They always think that there is light at the end of the tunnel, that big new order that will save their business. Unfortunately many end up in a formal process such as Voluntary Administration or liquidation, which is much more traumatic than an informal process of turnaround.
Business owners should ensure they have professional and pro-active advisers able to identify issues early - advisers with the strength to confront the entrepreneur with the advice that something dramatic needs to occur if the business is to avoid a formal restructure.
So, what steps can small businesses take to get back on track?
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.
At FactorONE we pride ourselves on having a solid reputation through the turnaround management and SME industries. Michael Fingland of Vantage Performance (winner 14 state and national turnaround awards for its success in saving troubled businesses) noted, "FactorONE are one of the most flexible of the debtor financiers we use to help implement turnarounds".
So if you’d like to find out more about how we can help businesses, call us today on 1300 322 8671.
