https://www.globalbankingandfinance.com/what-is-accounts-receivables-on-the-balance-sheet/Successfully managing your cash flow is your core purpose as an entrepreneur. If you maintain a positive cash flow, you’re doing good business. However, nothing lasts forever. Even the best companies sometimes get out of sync with their beat.
Often, it might not even be your fault. Business is an ecosystem. An event into the other side of the country or even city can disrupt your flow and throw you off balance.
For such an occasion, here are 25 ways you can help improve your cash flow and continue with business as usual.
Managing your accounts receivables:
- Send out your invoices as soon as possible
One of the biggest problems you’ll face is invoices being paid with delays. For that reason, you should always prepare them as your work goes by. Send them the minute your product or service is completed and collected.
- Chase your unpaid invoices
Always keep track of your unpaid invoices. Make the best effort to continuously chase your debtors and remind them to pay in time. It’s alright to pressure your clients if they overextend their payment period.
- Schedule step payments for long lasting contracts
If work on a long contract, or deliver a big shipment, try to negotiate step payments throughout the course. This will enable you to access your funds as you need them and maintain your business operations.
- Offer discounts for a quick repayment
Making discounts might sound like a counter-intuitive thing to do. But just consider how late payments will affect your cash flow. Most of the times a stagnated cash flow will result in either lost money or lost opportunities to earn money. Thus, making a small discount might actually even save you funds.
- Introduce an interest for late payers
Often, you’re able to include a penalty clause in your contracts with your clients. Whenever they overextend their payment period , you will gain interest on your earnings. These are rather rarely enforceable. However, having it on paper will create a passive pressure for your clients to pay in reasonable time.
- Use an invoice finance company
If you have no quick way to access your account receivables, you can always turn to a factoring company. This is a way to receive funding based on your unpaid invoices. You will pay a small fee on your total earnings, but you will gain 70%-90% of your invoice values in 24 hours. Thus, you should have enough money to continue your operations.
Manage your outgoing payments:
- Schedule step payments for big purchases
If buy a big stack of materials or hire sub-contractors, making a big payment might dry you out of working capital. Try to negotiate a step payment plan with your vendors. Most of the time they won’t object if they are receiving scheduled repayments.
- Negotiate billing dates to coincide with revenue payments
Sometimes your earnings arrive just a few days late to meet and cover your own business expenses. Usually, you can foresee such discrepancies. Negotiate a billing date with your vendor that will factor the date your funds arrive.
- Research better prices or deals for your most common purchases
Your cash flow problems can be simply because you buy from the wrong supplier. You might pay unnecessary high prices for your stock. Research your supplier options. Find out if you’re not driving yourself out of business.
- Negotiate discounts from your vendors:
If you have a good relationship with your vendors, perhaps you can use that to nudge their prices a bit. Perhaps, you might negotiate yourself a discount for regularly paying early. Or, you might offer them a payment in cash for a slightly reduced price. Cash payments are always more valuable than other types of funds.
- Make “on time” payments to avoid suffering interest
Plug out potential funds sinkholes by continuously repay all your debts. Mortgages, business loans and credit cards should be repaid in the order of closing out the smallest debt first. If relatively equal, target the one with the highest interest rate.
Managing your existing funds:
- Keep working capital in an interest-bearing account
You can store your working funds into a checking account that grants a small interest for you. There is often a requirement for minimum balance at most banks. But, with careful moderation, the interest can offset some processing costs throughout the year.
- Keep an emergency fund at a hand’s reach
Emergencies tend to occur when you’re least capable of handling them. When they do, you’d better be prepared to dish out a chunk of cash. This way your business can continue operations and you can work to recover those. Otherwise, you’re faced with having to withdraw emergency loans with huge interest rates.
- Avoid large, long-term savings accounts
If you put most of your capital into long-term saving accounts, you will receive the most merit out of your funds. Yet, if something happens and you need them to cover up some business costs, you have a problem. Most good interest accounts have penalties for breaking the term. First, you lose all your accumulated interest. Then you’re likely to suffer real financial loss in the face of penalty interest.
- Avoid loans if you’re barely meeting business ends
If you’re barely on top of your cash flow, it’s a bad idea to take on a loan, unless absolutely mandatory. If something bad happens (and, at some point, it will) you’re going to have a rough time. A loan will help drain your balance. Unless you find a way to inject funds into your business you might go into bankruptcy.
Managing your business assets:
- Rent out unused operational space
Maintenance for your empty warehouses might not be much, but it’s still coming out of your pocket. If you plan on using them again soon, just rent them out for profit. Otherwise just put them on the market and channel your cash somewhere else.
- Liquidate unused or dated equipment and vehicles
Dorman equipment that doesn’t meet your business requirements anymore should be sold or salvaged. If you’ve outgrown your old vehicles or machines, you should release their capital. Use that to fund your upgrades or just add to your savings. In any case, unused assets require storage and maintenance, while they don’t generate profit.
- Balance your excess of stock and raw materials
It’s often difficult to judge how much raw materials you need for your production. Sometimes, sales might overcome your estimates and you will find yourself in a shortage. Without the materials to continue production, you will lose out on potential sales. Yet, buying more than you can put to use can be even worse. Excess stock quickly loses its value. It might even become obsolete by the time you’re able to effectively use them.
- Sell inventory you can’t use effectively
When you own stock you can’t or won’t use for whatever reason, find a way to sell them as fast as possible. The price of any equipment and material in stock can only go down. Sell them while they still have decent prices, before they become obsolete and worthless.
- Optimize inventory and storage
If you often find yourself with obsolete stock, maybe you should rethink the way you store and use it. Perhaps, a new inventory system can reduce the amount of excesses. Thus, also reduce the size of purchases. Same goes for storage. Maybe you can squeeze your assets effectively and reduce the storage space and save on rent.
- Setup your tax planning as early as possible
Tax can sometimes overwhelm an enterprise that otherwise maintains a good business flow. There are many subtle tricks to minimize your taxes, while maximizing your gains. The most notorious is claiming your business expenses. There are a myriad of expenses that you can claim and reduce your taxable profit.
- Repair and renovate before you buy
Try to make it work with your current equipment. New equipment is expensive and you don’t have time to play on the market. Swapping old for new at a low price is a great deal, but don’t make this your priority. Your priority is to have your equipment working to continue your sales and earn profit. Repairs and proper maintenance gets you there faster.
- Buy used equipment if possible
If you hunt for related businesses in foreclosure or bankruptcy, you can find perfectly good assets for pennies. Even if you don’t, you can almost always get decent machines at fraction of the cost of brand new ones. These can serve you well and last years, without breaking the bank.
- Delay upgrades until your work requires
Tech and vehicle upgrades are overrated. Scrape away the marketing lustro and you will see that new upgrades rarely add enough value as to pay themselves off. Of course, if you do happen to pile severely outdated assets, your own operations might require you to upgrade.
- Don’t forget about salvageable scrap
Do you have old assets laying around that have practically zero market value ? Remember that they are probably still salvageable. Try to identify parts that you can sell separately. Or, you can use in repairing your other vehicles and machines. The rest, you can sell for scrap.
There go our 25. There are many more tips and tricks to achieving a balanced and stable business cash flow. Do you have a trick that works for you ? Have you hacked cash flow management ? Share your knowledge in the comments below !
Factoring Solutions is an independent broker for invoice finance companies and services. We work with business owners and provide free consultation about their factoring needs. Then, we provide a no obligation recommendation to their choice of factoring company.
The impact and implications of Covid-19 on financial reporting
By Mark Billington, Regional Director, Greater China & South-East Asia, ICAEW
The economic consequences of Covid-19 have been unprecedented, affecting activity in nearly every country in the world. Indeed, the latest forecast from the Institute of Chartered Accountants in England and Wales (ICAEW) projects that most economies in South-East Asia (SEA) would fall into recession in the first half of 2020 and Gross Domestic Product will contract by 1.9 percent over the whole year. Across the region, governments have had to bring in various fiscal stimulus measures to protect the economy.
Exceptional times bring tremendous challenges for businesses and requires leaders to have a clear view on the short- and long-term effects of Covid-19 on their businesses, and to respond accordingly. This starts with taking extra care to recognise the impact of Covid-19 in financial reports, especially of events which have occurred between the balance sheet date and the date when the accounts are authorised for issue.
Distinguishing between adjusting or non-adjusting events
As the coronavirus outbreak continues to evolve and more information comes to light about the nature of the virus and its impact, companies with 2020 year-ends need to consider how it has affected their business and how the effects should be reflected in the accounts at the end of their reporting period. This boils down to distinguishing whether Covid-19 should be accounted as an adjusting or non-adjusting event.
In December last year, China alerted the World Health Organisation (WHO) to several cases of an unusual form of pneumonia in Wuhan, central China’s Hubei Province. But it was only early this year when substantive information on what has now been identified as coronavirus (Covid19) came to light. As a result, for companies with a 31 December 2019 year-end, Covid-19 is generally considered to be a non-adjusting event.
This changes for companies which have early 2020 year-ends, who will need to consider the timelines more carefully to assess the conditions at the end of their relevant reporting period. For companies with 31 March 2020 year-ends, Covid-19 is likely to be considered a current-period event, which means that companies need to assess and record all events and conditions that existed at or before the reporting date. When it is determined to be an adjusting event, a business will need to review all areas of the accounts that might be adversely affected by the COVID-19 virus.
There may be a greater degree of judgement required when identifying the conditions at the end of the reporting period, and a closer assessment needed of whether developments are adjusting or non-adjusting.
Exercising judgement about conditions at the balance sheet date
Companies have to exercise significant judgement to determine the conditions that existed at the balance sheet date. This is heavily dependent on the reporting year end in question, the company’s own individual circumstances and the events which are under consideration.
A number of factors should be considered when making judgements about conditions at the balance sheet date. This includes the timing and impact on stakeholders such as staff, customers, and suppliers, of travel restrictions, quarantines and lockdowns, closure of businesses and schools; and government support initiatives. With each of these events, companies have to determine whether an event shines a brighter light on conditions at the balance sheet date or if conditions changed after the reporting date.
This evaluation in financial reporting is important because it affects the forecasting of future income and cash flows, which are based on conditions that existed at the balance sheet date. Estimating recoverable amounts might be very different for the same asset if the calculation was performed for a 2019- or 2020-year end.
Upholding values of corporate transparency and trust
In these times of uncertainty and crisis, it is even more important to be transparent about risks and assumptions used in financial reports, and to make disclosures as specific to the business as possible, to avoid the risk of financial reporting being downplayed. In fact, market regulator Singapore Exchange (SGX) and rating agency Fitch Ratings have recently cautioned companies against using alternative performance measures such as Ebitdac (earnings before interest, taxes, depreciation, amortisation and coronavirus) in their interim financial reports to flatter results, and stressed that “disclosures must be balanced and fair and avoid omission of important unfavourable facts”.
More than ever, businesses must continue to diligently uphold values of corporate transparency and trust and continue to disclose transparent and quality information to investors and other stakeholders. In order to do this, directors are tasked with the important responsibility to comply with various reporting standards and understand the circumstances of particular disclosures to provide a fair and balanced assessment of the company’s financial position and performance.
Covid-19 also has significant implications for audit reports on company financial statements. Preparing and auditing financial statements poses tough calls in difficult and unclear circumstances for directors and auditors. It is vital that these uncertainties are interpreted appropriately and in the context of the current unprecedented circumstances
As the business impact of COVID-19 continues to unfold and affect economies and the future of many organisations, businesses should continue to consider both their situation but also the wider economic landscape they operate in and reflect that in their financial reports.
 SGX warns against use of ‘earnings before coronavirus’ metric, The Business Times, 27 July 2020
Akerton Partners S.L. is a Spanish independent mid-market corporate finance advisor founded over a decade ago, in 2008, amid a global financial crisis.A group of professionals with extensive industrial and financial experience, decided to start providing clients with the value added necessary in situations where specialization, experience, commitment and know how make the difference. The firm specializes in providing financial advice to companies, their shareholders, investors, and lenders.
Akerton´s team has an extensive business background, which allows them to understand client´s needs as well as put itself in their shoes to reach the most appropriate solution under all available options in the market. Since one size does not fit all, Akerton tries not only try to find a good solution but ensure that it is the best one by performing a deep analysis of the company and its financial situation. Each case needs to be considered independently and from a variety of angles in order to identify and execute original and feasible solutions.A simple or single solution is not Akerton’s aim.Their independence and motivation for establishing long-term relationships with clients, allow them to always place their interests before their own, something that eliminates barriers and creates lasting relationships.
Currently, Akerton offers its services through the below business units:
Financing services to borrowers, investors, and creditors, on the design, structuring, negotiation, follow up, and control of long and short-term financing, including raising, refinancing, and renegotiating debt:
- Debt refinancing and restructuring.
- Finding and obtaining financing via debt or equity
(corporate, leveraged, subordinated, mezzanine, direct lending, sale and lease back option, amongst others).Public incentives.
- IBR’s and NPL’s portfolios analysis
- Debt acquisition.
Financing department represents 170 closed deals, 6 transactions under management and more than 2.272 M€ of debt amount.
Corporate finance,to corporates, private equity, family offices, and family businesses on all aspects of buy-side and sell-side , as well as the rendering of services related to financial strategy, business plan elaboration, business valuation and interim management in connection with budget and business plan compliance:
- Mergers and acquisitions (M&A): acquisition of company or asset, partners search, divestments of company, strategic alliances…
- Valuation: assessment of businesses or companies, earn outs and deferred payments schemes under a traditional process, valuation of companies in the framework of a debt portfolio acquisition process.
- Strategy: management continuity plans, strategic and business plans, management support to reach goals.
Corporate finance line represents 38 closed deals, 11 transactions under management and more than 570 M€ value.
Expert Advice and Due Diligence on processes and transactions requiring the verification and ratification of economic, financial, and accounting information including Financial Due Diligence in sale or purchase transactions (provided Akerton Partners is not the advisor of one of the parties to avoid a conflict of interest); as well as the elaboration of expert and economic reports in order to support law-suits and disputes:
- Financial due diligence for M&A transactions.
- Counselling for the defense and analysis of opposing expert reports, and elaboration of adversary expert reports.
- Economic reports for disputes and arbitrations and their ratification.
- Reports: validate CAPEX, economic ratios, PPA process, Impairment Test.
This line represents 196 closed deals and 9 transactions under management.
Real Estate and Infrastructures, for companies, investment funds, SOCIMIs and Family Offices to evaluate Real Estate assets by analyzing their portfolios and investment alternatives, granting differential and extra elements that add extra values:
- Analysis of Real Estate portfolios, projects and its development.
- Demand due diligence
- Market studies
- Operating and strategic planning and feasibility analysis
This business line represents 49 close deals, 4 transactions under management, 0,6M certified parking spaces and more than 1.2B€ revenue amount.
Public incentives, in the form of non-refundable grants, reduced or zero interest rate loans, as well as the application of deductions and exemptions in the Corporate Income Tax for R&D&I activities, transference of know-how or investments in assets, including those with an environmental improvement component.
- Grants/ subsidies
- Fiscal deductions
- Transfer of know-how: identification and quantification of R&D&I costs and design and implementation of transfer processes.
Team values are applied in every job, taking the best expertise of each individual to obtain a final global output. Counting on a multidisciplinary team enables to provide a global solution throughout the entire operation. Akerton’s professionals have developed a strong reputation based on experience, dedication and integrity, and its in-depth knowledge and longstanding experience in the industrial field allows them to have a rapid understanding of any client’s issues.
One of the main values Akerton owns is that its independence allows the company to put its clients’ interests first, above all other considerations, which let them remove any barrier and create continuous relationships with them. There are no restrictions, conflict of interest or other constraints to identify the best opportunityduring the process in a closely and congruent way, in accordance with client’s objectives and until achievement of financial close (turnkey contract).
Routine is not an option at Akerton. Commitment is other of its main values that is important to highlight. The firm builds a differential relationship of closeness and trust with its clients, able to maximize process achievement. And success as advisors is closely linked to client success.
As previously stated, Akerton was born during a financial crisis and it is important to mention that the company is living a second one, despite its short life, as a consequence of Covid-19. Nonetheless, the firm has rapidly adapted to this new environment, implementing all necessary measures to avoid business interruption such as working remotely and supporting its clients through different alternatives such as measuring financial impact of Covid, analyzing short term liquidity , providing mitigating factors or identifying all available financing tools such as managing and requesting “ICO loans”.
Once more, and additionally to the above features of the firm, Akerton shows its strong spirit as a corporate finance company, able to successfully overcome financial crises and add value to clients.
In order to find out further details of Akerton Partners, the following website can be visited: www.akerton.com.
SCA Deadline is Nearing: is the Market Prepared?
Strong Customer Authentication (SCA) – the latest security standard in the EU’s payments regulation – has been keeping market players on their toes. Business readiness to support it is becoming an increasingly pressing matter due to the rapidly approaching enforcement deadline, as well as rising levels in e-commerce fraud.
August 5th, 2020. Strong Customer Authentication, or SCA, has officially gone into effect on the 14th of September, 2019. However, with the market being unprepared to roll out the necessary changes till the priorly set date, the European Banking Authority has pushed the final deadline to 31st of December, 2020, with a few exceptions for an even later time in 2021. As the cut-off time approaches, so is the moment of truth: has the extended period enabled market players to adapt to the new regulation?
For those out of the loop, the SCA law states mandatory two-factor authentication for all online transactions and contactless payments made within the EU. Given the fact that, globally, e-commerce scams have been rising – the pandemic has played its part in the matter – the new reform is expected to provide an extra layer of security for customers.
In April 2020, the fraud attempt rate based on transaction value rose by 13%, compared to the same timeframe in 2019, emphasizing the favorable timeliness of the regulation. However, without proper preparation on both ends of the transaction, the enforced requirements are likely to result in increased friction, rather than weeding out scammers.
Marius Galdikas, CTO at ConnectPay, notes that there are still many questioning why and how exactly will this affect them. “Businesses and PSPs were not ready to handle the high volume traffic alongside setting up the new safeguards, hence the EBA’s permitted delay. A number of them, mostly SMBs, are still unaware of the SCA’s true impact on their activities,” he stated.
To reduce the number of confused shoppers, declined payments, and abandoned shopping carts, Mr. Galdikas advised getting on the path of SCA compliance should be the north star of every vendor’s current roadmap to prevent losing a great deal of sales. “What should not be overlooked is that SCA encompasses not just 2FA, but much more, including dynamic linking and proper messaging to the customer about operations being authorized.”
Although SCA compliance should be at the top of everyone’s mind, it is overshadowed by the current global landscape. Vendors are still wrestling with the consequences of the pandemic, trying to raise profits after months of imposed lockdown, and, with the deadline closing in, some described this European Commission’s law as “kicking retailers while they’re down”.
That said, in April the global e-commerce retail sales reached 209 percent year-over-year revenue growth. According to Mr. Galdikas, despite the adverse circumstances, implementing SCA-related changes is imperative in terms of avoiding the precipitous levels of fraud, rising alongside increasing profits.
And yet, there are a few moments the policy failed to observe, for example, making bulk payments – transactions to multiple beneficiaries from a single bank account – and the intricacies concerning their approval. “Each payment order has a unique ID and requires distinct PIN codes to verify them. However, generating many PINs – and fast – becomes tricky, especially for banks still running on legacy systems, which are not up to speed to SCA requirements.”
Mr. Galdikas noted the urge to move SCA up the list of priorities for merchants and PSPs to prevent transactional errors, mentioning ConnectPay has already done so in early May. It released an App, which covers multi-factor authentication and one-tap approvals for payments, and is also the basis for numerous innovations to come.
The new SCA requirements may still be a head-scratcher for businesses, banks and consumers alike, hence the importance to give it the necessary attention – to avoid vital steps being lost in translation.
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Akerton Partners S.L. is a Spanish independent mid-market corporate finance advisor founded over a decade ago, in 2008, amid a...