One late payment can start a chain reaction of bad debt. If your margins are tight, there is every chance those of your creditors and debtors are too. In an ideal Australia, everyone would have enough cashflow to keep money coming in and out, and everyone could continue to grow.
However, as Dun & Bradstreet data shows, unpaid invoices are rife, and the average payment time for these is nearly 15 days after the due date.
These late payments hurt everyone - but if you're struggling with cashflow, there is a way to break the cycle.
Solve cashflow woe with trade finance
Being able to pay your suppliers means ensuring your own money comes in on time. To secure certainty with this, a trade financing facility might be required.
This uses trade orders from customers as collateral, giving you up to 100 per cent of the supplier costs for international orders up front. Your business can use this to come to suppliers and offer a line of credit, keeping the supply chain ticking along.
Trade finance will preserve working capital, ensure you can fill larger orders, and keep cashflow steady. It is a vote of confidence in your ability to fill requests, and ensures your suppliers (and you) are paid on time.
Best practice with accounts payable
While trade finance facilities are one excellent solution, it is important that you ensure suppliers are paid on time with good credit terms as well. The longer you take to pay, or the worse your credit terms, the more supplier goodwill you can squander.
Trade finance can form one part of a well-oiled system that ensures you pay your suppliers on time.
Clear terms on when you will pay, how you will pay and how much you will pay should be a focal point from the outset of a business relationship. Your staff should be well-trained in optimising accounts payable, able to process invoices and purchase orders, and deliver information to suppliers or your trade finance provider as quickly as possible.
Trade finance can form one part of a well-oiled system that ensures you pay your suppliers on time, promoting best practice and keeping the cycle of cashflow going. Freeing up money to make (and pay for) orders on time can also open up prompt payment discounts, further increasing your working capital.
Financial pressures mean most businesses struggle to keep everything balanced, but there are solutions to ensure your business grows. Talk to the experts at Cashflow Finance about your trade finance options.