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Funding & Trading Performance Review

A client in the construction industry came to us because he was having cashflow problems. Unfortunately his bank was unwilling to arrange further borrowing unless this was secured which our client was reluctant to do. The bank had also discussed the possibility of factoring (selling invoices to a third party) with our client, but he felt that this would convey the wrong impression of his business to potential clients.

We reviewed the client’s business and discovered that its financial performance showed increased trading and profitability, with profits being retained within the business. This should have alleviated pressure on the cashflow. However we identified the problem which was that his debtor days had increased by over 100% to nearly 90 days because he had been unable to spend time chasing outstanding invoices.

We advised the client to employ a part-time member of staff dedicated to credit control which improved the cashflow situation and solved the problem. The client benefitted from this arrangement because he did not enjoy this aspect of running a business, he had more time to focus on obtaining sales and also the savings made from the cost of the interest more than covered the wages of the part-time member of staff.

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