Our new client found it impossible to control his cash flow and had become dependent on invoice finance to survive. Here’s how we helped him break the dependency and lift his profits.
Ron Rudd* was referred to us by a traditional factoring company. After four years, it no longer wanted him on its books.
The reason was because Ron’s company – an installer of high tech electronic equipment – had whittled its customers down to one.
In the world of factoring that’s considered too high a risk and his finance provider no longer wanted to support him.
However, Ron’s cash flow was an utter mess. He couldn’t run his business without invoice finance. No one else would lend him money. We were his only hope.
The fact that Ron had only one customer wasn’t such a big deal for us.
Unlike other invoice finance companies, We buy just one invoice at a time. As long as the debtor agrees to pay the invoice, we’re happy.
The company which employed Ron’s firm indicated it would, so the first hurdle was overcome.
Unfortunately, there were bigger hurdles.
Despite earning a lot of money, Ron’s books were in the red and he had a huge tax debt.
He also owed a large sum to the company which provided all his work because he had been buying inventory from it on credit.
However, the biggest impediment to his business was his addiction to factoring.
Over the years, Ron had paid the factoring company thousands of dollars in monthly fees.
That was money which could have gone directly into his pocket but was lost because he couldn’t manage his cash flow.
Without the factoring fees his profits would be much higher.
He needed to break this cycle of dependency on invoice finance, but he couldn’t go cold turkey or his business would collapse.
The first thing we did was ensure he entered into a repayment plan with the Tax Office.
We then agreed that a portion of the money from every invoice he sold us would go to reducing the debt for inventory. This was non-negotiable from our point of view and within a few months the debt was gone.
We then put a program in place designed to help him slowly reduce his dependency on invoice finance and get his cash flow in synch.
It wasn’t easy and it required patience and understanding on both sides, but working closely together over a few months Ron and his company reached a point where they no longer needed our help on a regular basis.
His business was back on track.
Ron’s prospects are looking better than ever. His industry is experiencing a boom thanks to the impact of the NBN and he is now well placed to make the most of it.
*We would never reveal the identity of our clients, so Ron’s name has been changed as have details which could identify him