Is managing cash flow one of your biggest challenges? Do you have sleepless nights over meeting all your outgoings? Perry Burns joins us to show you how to release cash tied up in invoices and get money owed by debtors into your business faster.
Managing Cash Flow


Managing cash flow is how Perry Burns helps the world. He is the Managing Director of Working Capital Partners in London. He works with small businesses where they are under pressure with cash flow. They are able to help them to release cash tied up in invoices, help them to pay suppliers on time and get them to a situation where they aren't worrying about paying the next bill or how they are going to grow their business.

Businesses dont go bust because they are not making profit. The main reason why businesses go bust is that they run out of cash.
How Working Capital Partners Helps with Cash Flow
The two most common ways are:

How much are you owed by your debtors? WCP look at their debtors ledger, checking the credit rating of those debtors, then effectively buying that ledger from them. As much or as little as they need. This gives them immediate cash.
If there isn't a debtors ledger or the debtors ledger is poor, that's where they focus on paying suppliers. This relieves the need for cash to pay suppliers.This is particularly helpful with younger businesses where suppliers are reluctant to grant credit terms. This intervention helps cycle their business quicker than they would otherwise be able.



 
What's the Cost of Factoring a Supplier's or Creditor's Invoice?
That's probably the most common question WCP get asked. (Well done Kevin!)

There isn't a simple answer. It depends on what percentage of invoice that is financed and how long the debt is outstanding. But most clients pay between 2 and 5% of the invoice value.

This is not the cheapest form of finance. However, it is one of the most convenient. And certainly one of the quickest to set up.

If your business is working on a reasonable gross margin, the fee can be built into the deal. Most of WCP's clients will discount immediate payment of 2-3%, or alternatively you can have your credit terms at 30-45 days whatever, and the price will be whatever it will be. Covering the WCP fee and they still get paid straightaway because they tae the invoice directly to WCP.
How do People React to 2 Tier Pricing Like This?
According to UK Finance https://www.ukfinance.org.uk something like £64 billion of UK debt is factored every year. Most debtors are very used to the idea that there will be a Factor involved and who will be intermediating the finance.

It is a very common way of financing deals.

Especially for larger companies. In some countries in Europe, 90% of deals are factored. Spain, Italy, nearly all deals are factored.
How Does Factoring Work?
When the invoice is raised, there is an Assignment notice put on the invoice. This can be done through Sage or Quickbooks or whatever.

The assignment notice says this debt has been assigned, to Working Capital Partners Limited, and please pay this bank account. It's a simple as that. WCP call the customer's accounts payable department to make sure they have got that assignment, they then pay into WCP's trust account. Once settled, WCP deduct their fee and send the money on to their client.
Are Assignment Invoices Paid More Quickly?
Do they just behave normally...stretching credit terms, or do they behave differently? When customers know that a Factor is involved, they TEND to pay WCP quicker than they would pay the client directly. The reason is they know that WCP know what they are doing. And they will be more aggressive in collecting that debt than a normal supplier.

They also know that WCP credit insure the debt. If they start paying late WCP will report it to there credit insurers and that will affect their credit insurance profile.

There is a kind of hidden advantage. You get paid quicker and that means you pay...

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