Funding through the Peaks and Troughs
Jason Gatt -APositive BDM, highlights some key issues with managing cash flow during seasonal peaks and troughs and provides some suggestions for the nearing Christmas period.
For many industries, the lead up to Christmas means a peak in their workload and income. Some businesses can do most of their annual sales in the build up to Christmas. The months leading up begin to get busier and busier, and businesses have to find a way to manage through the peak period. Let’s look at the impact the Christmas rush at Shopping Centres has on different Workforce industries, and some points about how they can manage this.
- Recruiters to retail and manufacturing see an increase in temp placements needed for the Christmas rush as more staff is needed in stores and more products are needed on shelves.
- Traffic Management businesses can see an increase in work as shopping centres can engage in them to help with the increased traffic during this period.
- Security Hire to shopping centres see an increase in required hours and manpower as more guards and patrols are needed to help with the increased numbers of shoppers in stores, especially with most centres opening for longer periods, some opening for 24 hour trading the day before Christmas.
Contrast to the peak, is the quiet period that follows, with a lot of businesses and accounts departments taking a break post-Christmas and closing for a few weeks in the new year. This can cause significant pressure on cash flow, as those invoices raised during the peak period, are not being paid until the accounts departments reopen.
For many, having a flexible funding product can be a great way to smooth out the cash flow requirements during the peaks and troughs.
- Funding and concentration limits: Some products like a bank overdraft will have a strict limit, generally linked to the value of property put up to secure the overdraft, and cannot be increased to accommodate the increased funding required during the peak season. Having a facility that allows you to increase your funding limits during the peak period is a great way to mitigate against the extra funding requirements.
- Funding invoices to advance cash flow: Debtor Finance can be a great way to accelerate your cashflow. You can access majority of the invoice value within 24 hours of the invoice being raised, instead of waiting the extra time for your customers to pay.
- Have flexibility around the invoices you want to fund: It is common for businesses that experience an extreme peak in their invoicing during a certain period, to only require a funding facility for that peak period. Some lenders will have lock-in contracts (generally 12 months) and will require all invoices to be funded, all year round. However, there are lenders who offer no lock in contracts, no minimum fees, and the ability to selectively choose which invoices to fund and when. This means you can choose to just use the facility for the peak periods, and fund only those invoices that will take longer to be paid by your customers. When the peak period finishes you can choose to stop funding the invoices, or fund on a lower scale.