FEATURE
‘ Extensive ’ runway to improve margins and the ease of capital access
With loans becoming more expensive or out of reach , businesses looking to strengthen their capital can turn to getting more out of their cash flows – one of the top three sources of funding , according to survey respondents .
Dynamic discounting is one such approach . This model helps businesses get paid early for their outstanding invoices , in exchange for a small discount . It differs from the more wellknown practice of invoice factoring , which often comes with higher costs and greater disruption .
Per the survey :
• Just 20 % of US respondents with access to it currently use dynamic discounting .
• Dynamic discounting can significantly reduce the time it takes a company to be paid to less than 10 days , far less than the 31.9 days that global respondents said it ’ s currently taking , on average .
The advantages of early payment for economic health are evident through the cash conversion cycle , a measure of cash flow efficiency . The cash conversion cycle is the amount of time it takes for a business to turn its investment in inventory , materials or labour back into cash . Accelerating this cycle is paramount during periods of high inflation , where costs are increasing on a weekly basis ; by getting paid faster , businesses can reduce their cash conversion cycle to battle increasing prices .
It ’ s an effective tool for cash management and yet still a nascent one ; just 8 % of US respondents said they would do this to combat the effects of inflation . US businesses with over 1,000 employees were almost five times as likely as their counterparts with 50 or fewer people to utilise dynamic discounting , with rates of 29 % and 6 %, respectively . Larger businesses tend to have more sophisticated cash management operations .
Atkins continued : “ Cash flow optimisation has been a strategy long pursued by the biggest enterprises , but it ’ s really one that any business can perform . When smaller businesses get paid faster , they ’ re functioning on a much more level playing field and focus on thriving instead of merely surviving . At C2FO , we believe that all businesses deserve access to working capital and function to put it within reach of any business . Time and again results prove that businesses that utilise C2FO have greater control over cash flow and successfully reduce cash conversion cycles at a significant rate .” x
MANY BUSINESSES HAVE RESISTED PASSING ON PRICE INCREASES IN ORDER TO PRESERVE CUSTOMER RELATIONSHIPS . www . intelligentcxo . com
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