Cash Flow

Debtors

Debtor Management

Working Capital:  We work diligently to match your company with the perfect private lending source to provide operating capital for your commercial needs. Whether it's a hard money loan you need that would come from private lenders, or perhaps traditional financing, (you may feel that money could be required for assets using a leasing company), let us work with you to get the finance you require to make that commercial project come together.  A business loan lease purchase or working capital can be obtained for most business purposes.  Geoffrey works closely with a few of the major banks and financial institutions.

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Cash flow:  It is often said that in business "Cash is King", this is said because cash is all important to businesses. Without cash, employees cannot be paid, suppliers cannot be paid, and therefore the business will grind to a halt.  Cash is the oil in the machine of business, and a Cash Flow Statement tells us the cash inflows and outflows in a business over a period of time. A Cash Flow Forecast is an estimate, made by the business, of the cash it expects to receive over a period (the inflow) and what it expects to spend over that same period (the cash outflow).

Remember: - A “Cash Flow Statement” tells us how much cash is available in a business to keep the business running - the actual cash flow.  A “Cash Flow Forecast” gives an estimate of how much cash will be available in a business. It is used to plan ahead and to help monitor business progress over the period.

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Debtors:  Are people or other firms who owe money to the business.  This happens where the business has sold products, goods or services on credit.  The business sells the products, goods or services allowing the purchaser a period of credit to pay - usually a month.  During this month the purchaser owes the firm the money and is therefore a debtor.

If the business has debts these are considered an asset, because when the debtors pay the business it will have converted the debt into cash in the bank.  Because most debts are relatively short-term they are considered current assets.

The amount of debtors a business has depends on the line of business they are in. If most of their business is with trade customers where they have to offer credit, then the level of debtors may be high. For many retail businesses however, the level of debtors will tend to be relatively low as most of their sales are cash sales.
 

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Debtor management:  When allowing your customers time to pay, it should be a conscious decision - 'we believe this customer can and will pay us on time' - based on knowledge, not an accident of selling.  If you knew a customer was about to go bust, would you allow 30 days credit?  If you knew that customer paid others very late, would you expect payment on time? 

It makes good business sense to find out as much as you can about your potential new customer.  Credit managers know that sales are increased, not reduced, by checking credit worthiness because sales efforts can be intensified with sound customers and not wasted on a mass of unknown prospects.  For further information about the credit checking system that we offer go to our Useful Information page.

There are many competitors for your customers' funds and a supplier less tolerant than you may have started legal action or even winding-up proceedings.  You need information to find out how others have fared recently. There are two very powerful reasons for managing credit risk:

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