This is a Working Example of our Forecasts
Registered users can produce their own business forecasts in minutes; exactly as is shown here.

Interactive Cash and Factoring Chart

This interactive chart shows how your forecast monthly bank balances and cash flows can improve as factoring or invoice financing is selected.

Tick to select Factoring / Inv. Discounting

Percentage of invoicing factored / discounted

Factoring Service Charge

Factoring Interest

Available Cash Flow and Free Facilities - Year 1
Available Cash Flow and Free Facilities - Year 2
Available Cash Flow and Free Facilities - Year 3

Cash Flow Deficits

These charts demonstrate your month-by-month forecast cash position, including cash from external financing facilities such as bank overdrafts, loans and (if selected) factoring / invoice discounting.

Any forecast month showing red is a cash flow deficit. It means that you either need to visit the What-If Calculator and planner to reduce overheads, investment and year-end stock or to increase borrowings until "Min. Month Bank and Borrowings" is in the black. Alternatively.............

If that won't work or more is needed to exapand business operations, you can select Factoring / Supply Chain Finace here,  choose a percentage of invoices to be factored then select a percentage for the sevice charge (if any) and the anticipated annual interest rate; which should not be much greater than the bank's.

Factoring / Invoice Discounting

The almost immediate cash flow benefits from factoring / invoice discounting may come at a cost but they also create opportunities. This is especially true for a business that is either undergoing or facing prospects for expansion.

Rising sales always put pressure on current assets such as stock / inventory and accounts receivable: Of these the most significant are increases in accounts receivable.

They may be readily cash convertible assets but as their value goes up your operating cash flow inevitably goes down. Using your invoices as a source of instant financing is an ideal solution to this. This is especially so if you are ikely to make purchases by letter of credit.

Supply Chain Finance

Factoring / Invoice discounting creates loans that are secured against the whole of a sales ledger. Supply chain finance on the other hand is much more selective, discounting sales to specified customers.

Almost always the specified customers will represent big businesses demanding grossly exagerrated payment terms, in some cases up to 120 days following the month of delivery. The difference here is that such unreasonably extended payments have the effect of increased costs and lower cash flows for an SME supplier in order to benefit their big company customers' cash fllows.

Supply chain finance rarely, if ever represents a cash flow benefit to suppliers therefore. The terms themselves are always offered on a take it or leave it basis; a practice that has more in common with extortion than good business practice.

Factoring and Collateral

It is the value of your invoicing that represents the factor's principal collateral. This means that personal guarantees, especially involving the family home should be absent from any proposal. However it also means that the quality of your accounts receivable and the efficiency with which they are managed is extremely important.

Your prospects for growth to enable your business to justify the costs of factoring until improved liquidity and operating cash flows render it superfluous are also important. Figurewizard forecasts are an ideal resource to establish when that is likely to be the case.

Cash flow from factoring or invoice discounting should never be used to finance long term investments.

Reputable Factors

What will be important is to know that you are dealing with a reputable factor / invoice discounter with a good track record. A factor / invoice discounter that is registered with the Asset Backed Finance Association (ABFA) is always a good idea.

This is because a number of secondary players, including the likes of payday loan providers are trying to enter the important factoring market. The signs are relatively easy to spot: For example if you are being asked for personal guarantees or a charge on the family home, you are almost certainly talking to the wrong sort of people.

FAQs
How to calculate liquidity and short-term liquidity How to calculate markup and margin The Truth about Monarch Airlines Labour's Spending over 10 years from 2000 How to make profits and not run out of cash Credit Checking - How to Read Micro or Short Form Accounts Amortisation of Arrangement Fees for Long Term Loans BHS Profits Performance 2010 - 2014 BHS profits, liquidity and cash flows 2009 - 2014 How to Calculate a Free Cash Flow Forecast Campari: How to apply for a bank business loan What are Current Liabilities What are Current Assets Late Payers and Cash Flow What is Operating Cash Flow What is Working Capital How to Read a Balance Sheet Business Planning Cash Flow Calculator Short Term Liquidity Business Liquidity Corporation Tax is not Calculated on Net Profit Small Business Corporation Tax Cash Flow Calculator Using Figurewizard - VAT Using Figurewizard - Sales by Month Using Figurewizard - HP or Instalment Plan Budgets Using Figurewizard - How the budgeted cash flow forecast is calculated Using Figurewizard - Fixed Asset Budgets Using Figurewizard - Calculate Purchase of Goods Using Figurewizard - Forecasting Payments to Suppliers Using Figurewizard - How to Forecast Cash Collection Solvency and the Balance Sheet Property in the Balance Sheet Why Equity is a Liability Asset Management and Liquidity Selling Fixed Assets Contracts: Invitation to Treat What is Deferred Income Loss on the Sale of Fixed Assets Calculating Gross Profit Margin Profit and Loss Statement What is Operating Profit What is Net Operating Revenue What is Equity Profit on the Sale of Fixed Assets How Taxable Profit is Calculated What are Operating Overheads Overheads - Provisions Depreciation