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

Any forecast months showing red represents a cash flow deficit. Your business plan will therefore be forecasting the liklihood of interruptions in the supply of essential goods or services, rendering the rest of the plan meaningless.

The What-If Calculator and planner can be used to alleviate this by reducing overheads, investment and year-end stock or by increasing borrowings until "Min. Month Bank and Borrowings" is in the black.

Alternatively and especially if you business is growing, you can turn to factoring / supply chain finance to dramatically improve your cash position.

Factoring / Invoice Discounting

The cash flow benefits from factoring / invoice discounting may come at a cost but they also create opportunities for financing increased sales activity and profits or by offering better payment terms to negotiate better prices and margins.

This is especially true for a business that is either undergoing or facing immediate prospects for expansion. That is because rising sales always result in more cash tied up in current assets such as stock / inventory and accounts receivable: Of these the most significant are increases in accounts receivable.

Cash flow pressures arising from increased business are also especially likely for a company that is engaged in or likely to become engaged in 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 fact that large corporationsare able to behave in this fashion may be reprehebsible but until a government steps in to outlaw such practices the only practical way to undertake the business is to finance it. 

Supply chain finance is far and away the the best option to do so as it is directly proportional to the size of the business being done with them.

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.

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