As the new year approaches, I feel it is worth reflecting on 2012. It has been a difficult year for so many small and medium size organisations. The economic climate, and the UK government’s reaction to it, has hit hard this year. Recent data shows things aren’t going to be getting better very quickly so many of us might not feel so festive this Christmas season, knowing that more hard times are ahead in the New Year.
A primary area of concern for so many organisations rests in the area of business funding. Banks aren’t lending as they used to and, quite frankly, with so much uncertainty out there, many businesses may feel reluctant to ask for a new bank loan or overdraft.
These difficulties highlight for me the potential of invoice finance and other alternative funders to fill the gaps that banks and other traditional lenders will no longer help with.
As we have discussed in previous blogs, these funding sources are not perfect. But if they are approached in the right way, and you are aware of the potential issues and knowledgeable about the potential solutions, they can prove enormously beneficial in these straitened times.
To that end, I have approached a number of invoice finance providers, and asked them for their best advice about what they recommend clients DON’T do in order to ensure they get the absolute best from their facility. They have come up with the following top tips:
- Don’t avoid sharing issues or problem in your business with your invoice finance provider. In our experience the earlier a problem is shared the more options for solution are available.
- Don’t try to create your own funding with pre-invoicing, fresh air invoicing or banking of cash. These major breaches immediately break trust with your invoice financier and any lasting relationship is unlikely.
- Don’t provide inaccurate or contradictory management information. The accuracy and consistency of accounting and sales ledger records play a major role in the confidence an invoice financier has in your business. Many smaller companies do not have full time qualified accountants, but competent financial controllers and credit controllers are worth their weight in gold.
- Don’t keep secrets from your invoice finance provider. You might be surprised how supportive and knowledgeable they can be.
- Don’t fester on service or funding concerns with your facility.Talk to them. They want to put it right.
- Don’t forget your factor has a wealth of debtor credit knowledge.
- Don’t hide bad news. They want – and need – to hear it all, good or bad!
- Don’t be over optimistic when budgeting. Why will next year be so much better?
- Don’t do deals with customers without checking with your invoice finance provider first, ie extend terms, take goods back, do bill and hold, or agree any set-off.
- Don’t try to make deals with customers over credit limits. They are there for a reason!
I give thanks to Caroline Langron of Positive Commercial Finance, Andy Thompson of ABN Amro Commercial Finance and Phil Woodward of Leumi ABL for their contributions.
I would also like to thank everyone who has supported us through 2012 and wish all a peaceful festive season and a happy new year.
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