Asset Finance as a Cashflow Management Tool

A constant demand on any business is the requirement for investment. This demand is driven by the need for growth, adaptation to changing market demands and competitive forces challenging market share. Countering this demand for capital expenditure is the need to maintain a strong cashflow and ensure the day to day overheads are covered. Cash liquidity is a key concern for any business and ensuring fixed costs are covered, while managing work capital and capital expenditure are a continuous challenge for any size company.
While there is no one, easy answer to this question, there are solutions available.
Budgeting upcoming expenditure for a 24 month period can be an invaluable tool. Fixed costs, such as wages, insurances, rent, rates and utilities can be budgeted with a high degree of accuracy and inflation can be factored in. It is the variable costs that cause the most stress to cashflow and this is usually linked to: 
  1. Expanding the business; and 
  2. Adapting the business to changing needs.
Planning and budgeting capital expenditure is a more difficult proposition. While plans for the coming year can be laid out as best possible, until a contract is signed, the requirements to fulfil a project can only be finalised at this point and the full cost planned for. The trickiest variable to plan for is working capital requirements. While a business is growing and taking on new work, the demand for working capital will keep increasing. While the agreed terms of payment for any project can be factored into a cashflow, delays in payment for various reasons can place a serious strain on cash and make the day to day operation of a business difficult.
Managing working capital and in particular debtor management should be a key priority. As working capital needs grow, ensuring the appropriate facilities are in place to mitigate the impact on cashflow is vital. Similarly, ensuring capital expenditure is appropriately funded and spread over a term, minimises the impact on cashflow and protects business growth opportunities.
Trying to factor these variables into the business cashflow along with the increased demand for working capital to facilitate business growth is a vital tool. A stable cashflow and good cash reserves should be a priority goal for every business. If your cashflow is stable, then meeting the weekly/monthly re-occurring costs does not take over the business management and allows the business to focus on expansion and growth.
If you would like to know more about how an Asset Finance solution could help cashflow management in your business, get in touch with one of the First Citizen Equipment Finance specialists today. 
Asset Finance as a Cashflow Management Tool
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