InterPrac Ltd
L3/29-33 Palmerston Cr
South
Melbourne VIC
3205
Phone: 1800 700 666
International:
+61 3 9209 9777
Fax:
+61 3 9209 9770
Email:
Cash Flow Finance
ProFund is a financial solution
to an Accountant's working capital and accounts receivable needs.
InterPrac also has a number of options available for accountants to
assist their clients with cash flow finance. For further information call
1800 700 666.
The Advantages of Debtor Finance
(Factoring)
Debtor Finance has many different
variants. All have one basic feature - funds are advanced to a
certain percentage against debts owed to a firm for services/goods
supplied on credit.
Common Advantages
The common advantage of Debtor Finance
is that it accelerates cashflow. Normally the money it costs to
produce a good/service is tied up in debtors and is not available
for the business to use until payment has been received. Through
Debtor Finance, cash becomes available well before the debtor
actually pays. The extra cash has traditionally been used to
purchase more stock, labour or advertising to grow the business. It
can be used for other purposes such as:
- Taking advantage of supplier
discounts. Many suppliers offer discounts of 5% or more for
payment within 7 Days. This discount more than offsets the cost
of factoring
- Removes some of the debtors
power in the relationship. The client is much less at the mercy
of the debtor in regard to payment.
- Avoid offering debtor
discounts. Some very large corporations take a significant
discount, eg 5% on payments for 14 days. In many cases Debtor
Finance is cheaper.
- Allows the owners to keep a
greater share of their equity as a business grows. All debt
lenders will cap the amount they will lend to a proportion of
the assets value (whether it be the businesses or the owners own
personal assets). Thus, if a business reaches this ceiling, the
shareholders must source funds elsewhere. By using funds
released from their debtors, they do not have to forgo any
equity by bringing in extra capital from outside the business.
- Another aspect of factoring,
widely used in the USA and only now becoming used in Australia,
is as an instrument in acquiring another company or a management
buyout.
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Financial Options
Key Features
- Flexible choice of vehicles
- Fully tax deductible
- Pre-tax payment deductions
