Only one third of insolvent firms suffered from trading losses
Only one third of insolvent firms suffered from trading losses, according to a recent study by the Australian Securities and Investments Commission. The remaining two thirds of business casualties were profitable but suffered from financial stress. The key contributor? Poor cash flow.
“The root cause behind cash flow problems is slow payment, especially for rapid growth businesses,” confirms John Fernandez, Managing Director of THN Capital Solutions. “The endemic late payment culture widely adopted by large corporates has forced SMEs to wait for months to be paid, so business survival requires the adoption of strict cash flow management policies, coupled with access to financiers who understand SMEs’ situation.”
Specialist financiers can help fund a business by taking security over the business receivables and/or inventories, helping to ease cash flow issues.
The cost of such funding is easily offset with business growth and better relationships with trade suppliers,” Fernandez adds.
“Furthermore, by pricing the cost of such funding into the business products on offer, cash flow funding becomes part of operational expenditure and is confined to the business itself.”