Ease your Cash Flow: Invoice Finance

There are several benefits that can be gained when a company decides to invoice finance. A business that deals in the sale of products or services to other businesses will receive the advantage of improved cash flow by using an invoice finance service.

Basically, to invoice finance means to sell or assign your outstanding invoices to an invoice finance company. This company in most cases will give you instant access to a percentage of the total amount of the unpaid invoices assigned to them, commonly from 70-90% of the value of approved invoices. In many cases they may also take responsibility for invoicing, chasing and collecting owed invoices as well as accept a percentage of the loss on unpaid invoices.

Having access to these funds greatly increase the cash flow within your company. Cash on hand for increased production, savings by way of discounts on company expenses, decrease or even elimination of business expenses, and improved opportunities for business loans.

By using an invoice finance service there is no waiting 30-45 days for people who pay on time, and even longer for late payments on invoices. That cash on hand can be more readily available for production, creating an immediate availability for more sales.

Another area the right business can gain greater cash flow from using invoice finance is in taking advantage of discounted payments of business expenses. Many companies offer discounts of as much as 10% if their invoices are paid on receipt or within a certain period of time.

With invoice finance you have cash on hand to pay your bills sooner, rather than having to wait until your customer pays you for your product or service. Increased cash flow also increases your companies purchase power, making it possible to negotiate better terms or discounts from suppliers. The savings in these two areas alone will in most cases outweigh the fee from the invoice finance service.

There are other business expenses that can be cut back or even eliminated when using invoice finance, for example: administration costs, stationery, and office equipment. When adding the expense of employing an accounting clerk, not only their salary but also company benefits, it’s easy to see some great advantages to using an invoice finance service.

Invoice finance can be particularly helpful to a business in the start-up phase. Most lending institutions have strict rules on lending to ‘new businesses’. A bank or lender will only consider a small portion of outstanding (unpaid) invoices owed, often only 40% of the total amount of outstanding invoices, when administering a business loan. By invoice financing your ledger shows cash on hand in place of a large amount tied up in outstanding invoices.

There are some disadvantages to using an invoice finance service. The goods or service your company supplies can have a huge effect on whether your company should use invoice finance. Businesses providing recurring services or product orders are good candidates, while invoices for one-time orders might find it difficult to obtain this type of funding.

These companies prefer to know the debtor and their track record in paying debts before accepting invoices owed by that debtor. Another disadvantage would be if the mark-up sale price of the goods or service provided were less than the amount of the invoice finance fee.

For the right business combining the improved cash flow with a reasonable profit margin along with increased sales orders the business is in a position to expand and the cost to invoice finance can easily be absorbed in increased profitability.

Converting Outstanding Bills Into Quick Cash through Invoice Factoring

Cash flow shortages can happen to almost any business, but invoice factoring can provide a quick, easy solution. Invoice factoring involves the selling of your account receivables or invoices to secure immediate working capital.

Invoice factoring lets you unlock cash that’s tied up in your unpaid invoices. Obtaining cash this way can be an easy, effective tool to solve small or medium size businesses financial challenges. Invoice factoring might be right for your business if you lack adequate working capital to maintain your operations or expand to the next level. Perhaps you’ve considered other options like bank loans, lines of credit or credit cards. But if your company doesn’t have enough financial stability or business credit, invoice factoring could be the perfect alternative to bank financing.

Here’s why: Approval for invoice factoring doesn’t hinge on your company’s credit history. Instead, it depends on the creditworthiness of your customers. Companies that purchase invoices will evaluate your customers based on their stability and payment track record. The invoice factoring company’s main concern is determining how likely your customers will pay and how quickly.

Apart from your customers meeting qualifications, your invoices must also pass certain criteria. There can’t be any existing primary liens on your invoices, meaning no other company should have a claim on the payments once they arrive. This ensures that the company purchasing your invoices has a clear right to collect the funds in your place.

Just about any company that generates commercial invoices can take advantage of invoice factoring. But is invoice factoring right for your business? It could be if your business is struggling to make ends meet because of long billing cycles, you’re wasting time collecting down payments from slow paying clients, you’re unable to take advantage of business opportunities due to lack of funds, or your business isn’t financially strong enough to obtain traditional bank financing.

Advantages of Invoice Factoring Besides providing fast access to capital, invoice factoring offers a number of other important advantages. It gives you unlimited access to funds without adding liability to your balance sheet. Because invoice factoring isn’t a loan, there’s no debt or monthly payments involved. Plus, invoice factoring is a flexible arrangement because it doesn’t require any long-term contracts.

Additionally, invoice factoring makes it easier for you to offer credit terms to customers. This can help you increase your sales without negatively impacting your cash flow. Invoice factoring also can help you take advantage of the early payment discounts many vendors offer on bills within ten days. Ultimately, invoice factoring can help build business credit. The cash flow you create from invoice factoring can make it possible to pay your vendors on time and establish a stronger credit rating. And this can assist you with securing credit from other vendors and financial institutions.

Another significant benefit of invoice factoring is the professional debt collection service provided by the factoring company. The factoring company is equipped to handle debt collections professionally and efficiently, leaving your staff to focus on core activities such as creating more sales. In addition, this will reduce your costs associated with processing invoices and handling collections costs.

How Invoice Factoring Works Invoice factoring is a transaction in which you sell outstanding invoices for immediate cash, instead of waiting the typical 30 days for the invoices to be paid. You receive an up-front, lump-sum payment for your invoices that’s slightly less than face value. The advance payment which can be provided within as little as 24 hours is typically 70 to 90 percent of the total invoice value.

After the purchasing company receives full payment for the invoice, you’ll receive the remaining value minus a ‘factoring’ fee. This fee is based on a number of factors, including your customer’s credit worthiness, the average terms, and the invoice number and size. However, generally, the invoice factoring fee is up to five percent of the invoice value.

To give you an idea about how invoice factoring transactions work, here are some of the main steps in the process:

Step 1: You submit an application to an invoice factoring company.

Step 2: After you’re approved for invoice factoring with the company, you can start forwarding your customers’ invoices to the company for cash advances. (Your customer will receive a bill from the factoring company, which will be responsible for all payments processing activities related to the invoice.)

Step 3: Assuming everything checks out, you’ll be advanced up to 90 percent of the value of the purchased invoices.

Step 4: Your customers most likely submit payments to the company that bought their invoice. This company, in turn, will forward you the remaining, unpaid portion of the invoice excluding the invoice factoring fee, of course.

When choosing an invoice factoring partner, it’s important to select the right kind of company to work with you and your customers. Here are some important considerations to keep in mind:

o What type of reputation and track record does the company have? When you turn over your customers, make sure they’re in good hands and that the factoring company is capable of providing the funding you need.

o How much is the invoice factoring company charging? Evaluate all the components of the price, including any fees, the interest rate and the portion of your invoice that is held back in ‘reserve’.

o What are you going to get for your money? Determine the company’s accounting, reporting and other capabilities.

o How will the invoice factoring company treat your clients? The company will have to communicate with your customers after they take over your invoices. You want to be sure the interaction that takes place is positive. If it isn’t, it may reflect negatively on your own relationship with these customers.

Invoice factoring is a powerful tool for companies needing to meet short-term cash flow needs.

5 Reasons Your Business Should Have an Information Protection Policy

Information is the lifeblood of all businesses, but many business owners and high level managers often overlook the security of their business information to focus on what they consider more important; “the generation of revenue.” Many even know the risk well in advance but take on the mentality, “It will never happen to us.” Then the inevitable happens.

Experience has proven that the disregard for the protection of business information is disastrous. The smallest vulnerability in a business’s Information Security System (ISS) can and does cause businesses thousands, even millions of dollars in financial loss everyday. Experts have found that in the majority of the cases involving “loss” from the theft of information that the business owner(s) or managers were aware that potential breaches existed and did nothing to correct the issue. Experts also point out that in 99% of the cases that the cost to fix the breach would have been thousands to millions of dollars cheaper then the loss the business sustained from the breach itself.

According to “Trends in Proprietary Loss” (ASIS International, 2007) these are the top 5 reasons businesses of all sizes should have an active and progressive Information Security System (ISS) and Information Security Management System (ISMS) in place.

  • Loss of reputation/image/goodwill – Taking a hit in the pocket could be bad but not as half as bad as taking a hit to your reputation. Many business can rebound from loss of revenue but repairing your business reputation can cost astronomical time, effort and money. The implications are overwhelming in most cases.
  • Loss of competitive advantage in one product/service – When you have been working feverishly to stay ahead of the game but your competitor beats you to the finish line every time, “There’s a hole in your boat.” The leaking of trade secrets, product delivery timelines and other business processes can completely derail a business and destroy its competitive advantage.” In 2006 there was a well known case of information theft concerning an employee from a major beverage. That employee stole trade information and conspired to sell it to another beverage company for 1.5 million dollars.The employee was arrested after the competitor turned her in.
  • Reduced of projected/anticipated returns or profitability – This can occur when your competitor knows your pricing strategy. If they’re selling the same type of product or service as your business they can, and will easily outprice you.
  • Loss of core business technology or process – A quick Google search will give you some insight on how businesses lose billions in the process when technology is leaked or stolen. The case of the drawn out and costly battle of the “Cell Phone Giants” comes to mind. Do a Google search about it. There are some really insightful facts that you may not have known about the case.
  • Loss of competitive advantage in multiple products/services

All of the above are sound reasons while your business should have an active information security policy. I am of the opinion that any business that regularly loses money and fails to implement processes to stop it,will soon be out of business. Therefore, I encourage all business managers, executives and owners to take the protection of their information seriously. Make time to review your current information security processes and policy with your security manager. Listen to his/her concerns and recommendations. After all that is what you hired him/her for. Concentrate on making your security a “Necessary good” instead of a “Necessary evil” and dedicate a reasonable but flexible budget to immediately address new or unexpected security threats. It could truly save you a life of headaches, court battles and money in the end.

Below are a few recommendations that I believe will help any business to begin improving their information security process. It will also help to improve overall security in general.

Recommendations

  • Ensure that sensitive information is only accessible to a small group of people based on a need to know basis. This information is to be kept in a secure area with progressive and redundant security measures.
  • The first level of security can be posted signage that designates the level of authorization required to be in specific areas. These signs should also advise the consequences for ignoring them.
  • The second level of security may include CCTV cameras which are manned or unmanned (but have the ability to be reviewed later). Cameras serve as a good method to detect, deter and in some cases respond to nefarious behavior.
  • The third level of security mandates designated key cards or key fobs to enter restricted areas. This authorization can also be indicated by color coded ID badges. A security checkpoint guarded by trained security officers is also an option.
  • The fourth level of security concerns areas where the most sensitive information is held. This area should include CCTV cameras, locked file cabinets and safes. This should be supported by a well written Information Protection Policy created in partnership with an experienced security professional and it should be strictly adhered to.
  • Lastly, a schedule for audit and compliance should be instituted and a designated person appointed the responsibility for its oversight. This recommendation has more to do with Information Security Management, which I will discuss in a later topic.

General Information Security Practices

The preceding concerned security strategies for highly sensitive information however, we must not overlook the need for the security of general business information. Information comes in many forms and businesses must protect them all. Here are a few more tips that I recommend to improve your current Information Security Policy:

  • Ensure that all documents that contain personal, personnel and company information are always kept secure. This information should never be left lying around on someone’s desk or in their inbox. Always keep this type of information under lock and key and designate a person to ensure strict accountability.
  • Ensure that you have a information security policy in place and share it with your entire staff. This policy should include how to file or discard company information.
  • Ensure that your company has a shredder and include shredding regulations (what should be shredded, when and by whom) into your policy.
  • Always ensure that someone in your organization stays abreast of current cyber threats. This person is normally the head of the IT department or your security manager. He/she should also ensure that your anti-virus and firewall systems are regularly updated and tested. If your company does not have a dedicated IT department of manager it wouldn’t hurt to consult with an IT Security firm to get a check-up.
  • Ensure that your Information Protection policy includes regulations pertaining to thumb drives and portable hard drives. The policy should clearly state what information can be saved or uploaded from and to the devices. Also consult with your IT department to disable the USB ports on your computers and networks if necessary.
  • Finally, every business should have a Non-Disclosure Agreement. NDAs set the expectations for your employees as it pertains to the privacy of your business affairs, processes and materials. It also provides the recourse for violating the policy. can be found on the web, but I recommend consulting with your attorney to ensure that your NDA provides you and your business optimum protection.

That about sums it up. I believe that by implementing these strategies that every business can improve the protection of their information and reduce the chances of suffering financial loss. In many cases you may even increase your profitability, which is why we are all in business anyway. I hope that you found this information valuable. Never underestimate what a solid Information Security Program can do for you.

Thanks for reading and I hope that these quick security tips help to kick start or rekindle your Information Security Program.

Cash Collecting – 10 Reasons Why Electronic VS Standard Invoicing Wins

Should your business cash collecting be evolving and changing with the technology? In today’s world when everything is becoming virtual overnight, cash collecting has been moving fast towards full automation and paperless existence.

Research by leading IT analysts has found that companies with the fastest-growing profits in their industry sectors are the ones that are changing their document processes and automating them. Businesses with effective document processes in their billings and cash collecting are more likely to experience profit growth and shortening of their cash payment cycle. Unfortunately, for many businesses invoicing and cash collecting still involves manual processes. These inefficient manual steps limit the business ability to achieve objectives such as reducing cash payment cycle and increasing profitability.

Still, many other businesses have now been doing their cash collecting using the latest, fully automated document management technologies, mobile SMS messaging, e-mailing and electronic voicemail delivering. For the same reasons, many businesses have already moved to electronic invoicing and cash collecting.

This is not only a step forward in decreasing the global carbon footprint, electronic invoicing has lots of other added advantages over the standard invoicing. These are 10 big reasons why electronic invoicing and cash collecting vs standard methods always wins:

  1. Web based technology is inexpensive and easy to install.
  2. Substantial business cost reduction (E-billing results in substantial cost savings as no paper printing, mailing and posting of invoices is required).
  3. Instant delivery of invoices (your bills/invoices are being delivered instantly and you can also trace the delivery/reading status).
  4. Shortening of transaction cycles (automation shortens all steps in credit control, from invoicing to collecting).
  5. Invoices could be resent at any time (once in the system and sent to the clients, invoices could be resent at a click of the button many times if required).
  6. No filing is required (your business will save on human resources as the invoicing could be done with less staff, with no filing required).
  7. Easy access to invoices (invoices are accessed at the press of the button at any time).
  8. Significant reduction in Days Past Due (DPD is a measure of the average time to collect receivables. An automated billing system is easily configured to send regular reminders to unpaid bills. This regularity will significantly reduce the payment cycle).
  9. Anyone in your business could be trained to cash collect (using an automated system is simple and easy to use with little training).
  10. Increased productivity and profitability (with fewer manual tasks in accounts receivable, more could be achieved with less people).

As you can see above, automated document management and cash collection has the potential to deliver significant benefits as a result of eliminating document process inefficiencies within cash collection.

Landscape Contractors: Manage Your Cash Flow With Invoice Factoring

The market of landscaping comes in many forms from commercial and residential contractors, architects, grounds departments to educational institutions and suppliers. No matter what part of landscaping your business falls under there is always a need for managing your cash flow to grow. Have you been turned down for bank financing or have an inadequate bank line of credit? If so, invoice factoring may offer your business the assistance you have been seeking. In today’s instantaneous world, landscaping contractors now have access to working capital with quick turnaround. In some cases your business can immediately receive cash the day after the invoice is generated. In addition, factoring gives you a way to manage cash flow while eliminating the uncertainty of when invoices get paid. Whether you are a start-up company or a seasoned business, invoice factoring can help to guarantee your monthly accounts receivable.

In these uncertain economic times, many commercial businesses and residential property owners are stretching payments out longer and longer, oftentimes delaying payments owed for months. Because of this, many landscaping businesses need to quickly raise cash just to stay afloat. With predictable cash flow, landscaping businesses can reap the benefits of receiving their money as soon as the services or rendered goods are delivered. In addition, invoice factoring provides freedom from accounts receivable collections and allows the company to do what they do best… landscaping. Factoring companies specialize in the following:

• Often can fund your invoices the very next business day.
• Give your landscaping business steady and predictable cash flow.
• Give you access to working capital for your business.
• Can often work around IRS tax liens, personal credit issues or client concentration problems.

As a result of the above, landscape contractors now have a workable option when wanting to expand their company for future success. For example, commercial and residential landscaping businesses can be labor intensive which oftentimes require a need for large payrolls. As landscaping companies expand their business, so does the need for additional working capital to cover expenses such as payroll or light/heavy equipment purchases. By choosing a factoring company, landscaping businesses now have the opportunity to avoid asking for embarrassing deposits for job funding; fund all types of maintenance including government, municipal, commercial and residential landscaping jobs; pay cash for materials and supplies that are needed; and pay vendors on time improving credit standing. Now landscaping businesses can live with a sense of confidence knowing that they will have quick access to working capital.

It has been predicted that the landscape industry is expected to grow as much as 13% in the next five years. In order to manage this growth, factoring can provide these businesses an efficient way to manage their cash flow with predictable working capital. By offering immediate access to cash, invoice factoring companies provide landscaping businesses the ability to bring their ideas to life, expand their customer base, and grow their businesses into the future.

Making Your Employees Understand the Value of Information

When deploying a bespoke information security awareness campaign, the ultimate aim is to build a mindset in which employees come to respect and protect the information they work with. To achieve this, it’s imperative that employees fully understand the value of that information.

Failing to understand the value of information is a major cause of information security breaches. For example, it’s the reason why sensitive information ends up in wastepaper baskets or recycling boxes, which subsequently exposes it to ‘dumpster diving’ – the practice of scouring company bins for useful competitor intelligence.

Failing to understand the value of information has led to some of the high profile ‘laptop left on a train’ incidents, where employees are walking around with sensitive information on their hard drives that hasn’t been encrypted for transport.

Failing to understand the value of information can even cause employees to talk themselves into doing things they’ve already been told is bad practice, such as connecting to an unsecure hotel wi-fi to check email. We’ve all been tempted to do it because of the convenience. What stops us is knowing how valuable the emails coming in and out are – all of which can be intercepted on an unsecure wireless connection.

Communicating value

The value of information is best communicated through a clear information classification scheme. For example, let’s use the traditional labels of ‘public’, ‘internal’ and ‘confidential’ information. One of the most effective methods of communicating value is to consider all of the information types within your organisation and categorise them under these headings. Turn that into a clear communication that allows employees to see exactly which information types should be considered under which classification. There are also some engaging and fun ways to embed this in your employees’ minds.

Make classification mandatory

Making classification of all documents mandatory also helps to embed this consideration of value. A classification must be assigned to every new piece of information that employees generate. Similarly, every piece of information they receive must be immediately checked for its classification. If a piece of information is passed on without a classification, then the practice of sending it back to the originator for classification will eventually cause this handling procedure to become second nature.

Protecting confidential information: Carrot or stick?

For most organisations, accidentally or intentionally disclosing confidential information is a disciplinary offence. As long as you state this as part of a campaign that simultaneously instils the value of information, then it can be quite effective.

However, bear in mind that the most effective internal communications campaigns succeed by aligning the objectives of the employee with the objectives of the organisation. Therefore, a more effective method is to make the employee see the personal value of protecting information at work. There are many messages that can be used, such as building the employee’s perception of their contribution to organisation success, and the need to protect the integrity of this achievement. You can also communicate how devastating an information breach can be – for example, through lost revenue or a fine from the Information Commissioner’s Office. An information breach could even cause enough lost competitive advantage that an organisation is no longer able to operate at the same size it was. This associates the concept of information security with job security.

Acformation – The New Information Paradigm

The First Paradigm – Age of Information (circa 1980 – 2000)

Information, coming in, captured the then market realities. It represented the collective market notions such as ideas, beliefs, etc. for a given time period. The Information Gradient (IG), the rate at the which a given information changed – proven, disprove etc. was fairly linear. In other words, the market behaviour was within the predictable limits of Organizational Think-tanks (OT).

The Second Paradigm – The Rise and Fall of Real Time Information (circa 2000 – 2012)

The changing market dynamics brought new problems to these OT. The IG lost its linearity. It became a victim to unforeseen market forces, and thus became more skewed. The Information captured did not convincingly represent the market notions.

It was then time for the next paradigm shift – the Real Time Information (RIT). But, RIT never represented information at all. It was a screenshot of the market notions at any point of time. It allowed the OT to ‘trust’ the market forces before taking any strategic decision.

It worked well for a while. Until RIT started losing the ‘realness’ of the information. As the real-time capturing of information peaked, companies started becoming more aspirational. They wanted information created a moment ago. While the technological advancements made it possible to capture and deliver information real-time, these companies found it difficult to put this information into perspective. For a vital component of the information made no sense – how useful is this piece of information for the immediate decisions to be made and its integrity for long-term strategic decisions.

The era of RIT came to end.

The Third Paradigm – The Age of Acformation (Present)

RIT is dead. How could a piece of information captured a minute ago make sense? More so, when information captured a minute ago will not be the same as the information that is to be captured the next minute. Especially in an industry such as Apparel or Footwear where the fashion trends are changing.

RIT lacks a continuity, in terms of aiding the business in taking market decisions.

Acformation was born. It stands for Actionable Information.

Acformation is radically different. It does not capture or represent information at all.

Acformation, in essence, represents the rate of change of information. In other words, it represents IG. IG is a meta-information, i.e. information about Information. It provides the much need context for the information, and is thus, Actionable.

Understand your company’s Information Structure

As a retailer, you need to understand the Information Structure of your business.

Primary Information (PI)

Stock Levels

What do you have? How much of it do you have?

Sales

What has been sold?

How much of it has been sold?

Secondary (or Meta) Information (SI)

What did this customer buy?

How much did the customer buy?

What is the Customer Profile?

What is the customer buying history?

Miscellaneous Information (MI)

Company Performance

Accounts and Balance.

Actionable Information (AI)

Given the PI, SI & MI levels, how disposed is the customer (or a group of them) to buy in the future?

How likely will the purchase be made?

How frequent will this happen?

Will there any change in their preferences as result?

How resources is your shop in making this happen?

Factoring and Invoice Discounting – What Are the Differences?

Whether you are a new business dependent upon regular cash flow, or anticipate an increase in sales and are eager to take advantage of it, then perhaps you should consider a factoring facility. There are many benefits to factoring and invoice discounting, and they could prove to be the answer to your cash flow problems.

If you are already familiar with factoring then you will have also heard of invoice discounting. The invoice finance market consists of factoring and invoice discounting companies; these can be operated by well-known big banks or independently run specialised companies. Each one sets their own criteria, capabilities and prices which can vary greatly.

Factoring and discounting are both quite similar, but you need to have an understanding of both before you can make a decision about which would suit your business needs the best. Here is a quick explanation and their main advantages.

Invoice Factoring – Factoring is a finance facility that enables you to raise finance based on the value of your outstanding invoices. Instead of sending out invoices and then waiting up to a month or more for the cash to arrive, you can change them into cash almost instantly. Many businesses just starting out have come to the realisation that factoring offers a more flexible source of working capital than overdrafts or loans.

Factoring an invoice basically means that your company is selling the financial rights of the invoice to the factoring company. The transaction is arranged as a sale and the factoring company will pay you the invoice amount in two payments. The first payment is known as the advance and given to your company as soon as you sell the invoice to them; this can be up to 90% of the invoice. The remaining 10% to 20%, the rebate, is received when the client actually settles the invoice.

When applying for a business loan you generally have to wait some time before finding out if the application was successful or not. Factoring is much easier and quicker as the waiting period is much shorter. As the factoring companies generally buy the invoices from the company, their main worry is if the company paying the invoices has good credit, this means that small businesses or those needing to raise cash have a much better chance of getting a factoring line, as long as they work with a strong client list.

There are various fees attached to invoice factoring services, they can be higher than the cost of a business loan and are decided according to the size of the line, the credit quality of the invoices, and how stable the client’s business is.

Invoice discounting – This works in the same way that factoring does, by freeing up cash from your invoices. The difference is that the lender does not offer credit management services to facilitate collecting your outstanding invoices. The service will just release up the invoice value, which can be up to 90%, and you keep control of the credit management. The remaining 10% is then accessible when your customers pay the invoice.

Cash is the livelihood of every company and if you are owed it but don’t not actually have it in your hand then this can cause you a lot of frustration and potential headaches. Invoice discounting lets you keep control of your debtor book as you are in charge of managing the credit, this means that your business is responsible for collecting clients outstanding due payments.

The advantages of using invoice discounting are that it has no affect on the relationship between you and your clients. There is no reason for them to know about the contract, particularly if you operate a confidential invoice discounting facility. This ensures you are able to carry on providing the same credit terms arranged prior with your clients without affecting the company’s cash flow.

Your business retains control of the company’s sales ledger and manages the credit control. By releasing up to 90% of the gross invoice value it provides your business with the answer to cash flow problems. Usually invoice discounting is cheaper than factoring as it doesn’t take up as much time, however, it does have a higher risk potential.

A quality factoring company will provide you cash against your existing debtor book and finance invoices as you raise them. They can also assist by collecting the outstanding payments by way of their credit management service.

What Information Does An Employee Expect? – An Employee Communication Primer

OPENING BELL:

With the corporate laws becoming stricter in India and the ‘Right-To-Information’ Act being enforced in the ‘right’ spirit, coupled with the hyperactive media & proliferation of social networking websites, the word ‘Transparency’ has acquired a new meaning in the world of business. Till early 1990s, the word ‘transparency’ was just not in the business lexicon and today it is a stringent legal, a professional, business and a societal necessity.

Like a coin, the word ‘transparency’ has two sides. One side pertains to the information that the organization shares with the outer world (like government agencies, investors, business magazines, news channels, and voluntary organizations) for compelling reasons and the other side is about the stuff that the organization feeds or notifies to the employees for the intended reasons.

In the contemporary world, the employees are far more conscious and vocal about their rights. In fact, feeding them information is equal to “what the doctor ordered”; give them a little information and they ask for more. Why? Because they believe that the information (like knowledge) is power and more information is decidedly better than no or half information.

Employees born after 1992 (known as Gen x or Gen Alpha) are the blessed ones as they have escaped the era of ‘information starvation’. When they were growing up, India was getting progressively liberalized and information was becoming available more easily. Consequently, they became adult with the ‘mindset’ that they have a (legitimate) right to expect, get and receive information that affects them.

As of now, it seems that the HR profession in India has taken the partial cognizance of this ‘info savvy’ or ‘info hungry’ employees and their expectations for the ‘transparency’ in information sharing (within and from the organization). What information the ‘info hungry’ employees expect from the management or the company?

Let us explore in a telescopic way, i.e. from the personal level and to the organization level, and look at the instructive list of the information needs.

As an employee – Individual & direct information needs:

 

  • How is my compensation calculated and what is my take-home pay?
  • How do I plan for my income tax?
  • What are the HR policies applicable to me and what each policy means? Whom should I give feedback?
  • What are my entitlements and how & when do I receive or claim them?
  • What are the performance measurement criteria applicable to me?
  • How will I grow or get promoted and approximately within what time-frame?
  • Whom should I speak to in case of any difficulty, personal or professional?
  • What are the unwritten but important Dos and Don’ts, behavioral and otherwise, of the organization?
  • Who are the key members of my immediate senior management and what are their profiles?

 

As a team (cross-functional) member – Individual, collective & direct information needs:

 

  • Why I am chosen as a member? Why others are chosen as team members?
  • What are the goals of this team?
  • Why a particular employee has been appointed as the chief?
  • Whom the team will report to?
  • What is the timeline for presenting the outcomes?
  • What resources the team has at its disposal?
  • Will my job be at stake if the team does not deliver as expected?
  • What are the extra privileges available to a team member?
  • How the conflicts within the team will be resolved?
  • How will my performance as a team member be linked to my annual performance appraisal?
  • Who will help if I or the team requires training or other support?
  • What if my Functional Supervisor hinders my participation in the team’s work?

 

As a member of the Function/Department/Unit – Individual, collective & direct information needs:

 

  • How my function/department/unit has fared this year?
  • Why my boss has assessed my performance as inadequate when the function/department/unit has done so well? Does that imply that the ‘sword is likely to be on my neck’?
  • Why our function/department/unit is treated like an orphan by the management?
  • Why I am not being given challenging assignments?
  • What are the key developments in other functions/departments/units of the company?
  • Why employees of other functions/departments/units get better or more benefits?

 

As a member of the organization – Individual & indirect information needs:

 

  • What are the core values of my company?
  • How my company has performed during the specific period and what are the central reasons for the performance?
  • What are the significant developments (political issues, competition related, mergers, acquisitions, takeovers, government policies, etc.) that affect my company (and therefore, me)?
  • Whom should I talk to if I receive unsubstantiated information about my company from the external or internal sources?
  • How my company is planning to grow in coming 2-3 years?

 

CLOSING BELL:

Though the information needs become more specific, differentiated, and time sensitive as one moves up in the pecking order, it cannot be denied that the same information can be shared, of course, on a case-to-case basis, in different ways with different levels of the employees, at the same time or at different points of time. Reaching out to the employees at the right time is always a healthier option irrespective of whether the employees have voiced about their information needs. Information shared at a date later than the required, serves no purpose. All employees do not require all information, but some employees require some information. Correct?

Transparency in sharing of information implies ‘openness’, which is a key constituent of a healthy organizational culture. However, the degree of openness is a subjective criterion and it depends on the workforce’s collective perception, which is primarily influenced by the difference between the management’s advocated philosophy or business policy and the real practice of sharing the information. Transparency in sharing information is a key ingredient for trust-building between the employees & the management.

The real torch-bearer of the ‘transparency’ is the HR Head. She is not only accountable to make sure that every employee receives the ‘required’ information, but also should persuade or even insist when required, that the members of the senior management demonstrate openness and behavioral transparency, consistently.

‘Behavior speaks louder than words’ and here it means that no member of the senior management should be seen as ‘hiding’ or ‘suppressing’ or ‘tweaking’ the information. Practicing ‘transparency’ is an art as well as a science for HR the professionals. It is more an art when they have to be transparent themselves and it is more of a science when they have to make sure that the employees perceive the organization as transparent.

Why Using Invoice Factoring Is a Smart Business Move

Many businesses struggle with having enough money on hand to meet financial obligations. This is the definition of a “Cash Flow” problem. To address this problem, companies generally take one of two approaches:

 

  1. Use other people’s money (OPM), i.e., borrow; or
  2. “Bootstrap” the business by using its own assets and financial resources.

 

Most business owners instinctively look to borrowing as the solution. This article discusses Bootstrapping as a viable alternative.

Other People’s Money

Using OPM involves either equity financing (selling away a piece of the business – and thus part of your autonomy) or debt financing (borrowing). This article focuses on debt financing.

“Debt” is the money owed to another person or institution. If used to address a Cash Flow problem it can be an albatross around the neck of a company. When a business “borrows” money (i.e., takes out a loan), it incurs a debt that must be repaid. The repayment includes both principle (the amount borrowed) and interest (the fee to be paid to the party that lent the money).

Debt puts a constant demand on cash flow. That’s because you are obligated to pay back the loan through monthly installments. Whether your business is having a good month or a not so good month you must direct funds to the lender or face the possibility of default. If you default, the lender has the right to foreclose and take whatever assets are necessary to pay the debt in full.

OPM’s Impact on the Balance Sheet

The act of borrowing forces a double entry on a company’s Balance Sheet. The cash acquired by virtue of the loan becomes a “Cash” Asset on the books. However, an offsetting Liability must also appear because that money is not yours and must be paid back.

This is an important distinction because one of the ratios used in assessing the financial health of a company is the Debt to Equity Ratio. This ratio is calculated by first taking the value of a company’s Assets and subtracting its Liabilities. The remainder is the company’s Equity. The Liability value is then divided by the Equity value to determine the ratio. The higher the ratio number the greater the risk that the company will not be able to meet its loan payment obligations.

This ratio can impact the ability to borrow more money. It can also impact the willingness of vendors to extend payment terms to your business. A highly leveraged company can be a poor credit risk which can cause vendors to demand cash payment for merchandise.

Bootstrapping the Company

Bootstrapping does not have the downside potential of borrowing. When bootstrapping you use the existing resources of the company to leverage growth. This leverage involves understanding all the assets your company has and how to capitalize on them.

For companies with business-to-business (B2B) and/or business-to-government (B2Gvt) transactions one of the best assets to leverage is its Accounts Receivable. Accounts Receivable (A/R) is the volume of money owed to you for product delivered and/or service rendered. It is a debt that another company or government agency owes to you.

Unfortunately, you can’t spend A/R. That money is not in your bank and can’t be used to meet payroll, buy material or pay taxes. You can, however, convert that A/R to cash without pressuring your customers to alter their payment terms. The solution is to factor the invoices. “Invoice Factoring” is the process of selling individual outstanding invoices for cash. It is a transaction that stays exclusively on the Asset side of the ledger in that it converts A/R to Cash. In an invoice factoring transaction you are not borrowing money; you are selling an Asset. Therefore there is no Liability entry on your books.

Under What Circumstances Can Factoring Be Used?

The utilization of Invoice Factoring is a right granted to a business by virtue of Article 9 of the Uniform Commercial Code. A business may “assign” the right to payment to a third party – a factoring company. There are very, very few situations where your right to assignment may not apply. This means that any B2B or B2Gvt enterprise can use Invoice Factoring as a means of resolving a Cash Flow challenge.

Which Financial Institutions Offer Invoice Factoring?

While a few larger banks have departments that do true Invoice Factoring, most do not. One reason is that, in general, the underwriting criteria for Invoice Factoring differ from that of a traditional business loan. But because banks are regulated by the Federal Reserve, those that do have Invoice Factoring Departments will typically apply the same underwriting criteria to both lending and factoring. This means they will look very closely at the personal credit and business credit of those applying for a factoring facility. If those scores are not good, the application will be declined.

Independent financing companies have greater leeway. Their primary consideration is the creditworthiness of your customer – the entity obligated to honor your invoice. If their commercial credit rating is good, the probability of winning a factoring facility is very high. Your company’s credit and/or your personal credit score will have little impact on the decision to fund.

Summary

When confronted with a cash flow problem, the majority of business owners impulsively look to borrow money. This is a viable route, but it important to understand the potential challenges:

 

  • It adds a Liability to your Balance Sheet
  • It affects your credit rating
  • It raises your Debt to Equity Ratio
  • It imposes an additional monthly demand on cash flow
  • It automatically creates the possibility of default and foreclosure

 

Bootstrapping and the use of Invoice Factoring is a reasonable alternative. It offers a quick and effective way for a company to use its existing resources to solve a problem. It is inexpensive, and, by law, universally applicable. Used correctly, it can help a company survive in difficult times and thrive when times are good.