Case Study
Cash flow finance protects cash flow for confectionary manufacturer
An ongoing balancing act
Maintaining cash flow during fluctuations in demand is a critical balance for any small or medium sized business.
Demand fluctuations that require significant capital outlays and in some cases delayed receipt of revenue can lead to serious cash flow problems.
Problems are only exacerbated when existing finance agreements are unable to accommodate anticipated and unforseen demand hikes.
Consider this equation for Australian confectionary manufacturer and distributor, Bella, whose busiest time of the year is naturally the Easter period.
To counter the risks of outlaying considerable resources and carrying a large debtors ledger, the chocolate and confectionary manufacturing company turned to cash flow finance as the working capital option best suited to the nature of its business.
Michael Harvey, Managing Director of Bella Confectionery, employs Bibby Financial Services to provide factoring for its business that services wholesalers and supermarkets nationally and throughout New Zealand.
"Leading up to and during the Easter period we need to employ extra staff, purchase more raw materials and boost marketing activity to meet demand that may not equate to cash flow for weeks," Michael said.
"In the meantime we are obliged to pay immediately recruitment companies who supply personnel and honour supplier contracts as well meet our fixed overheads such as rent and tax.
Factoring saved management time and protected the bottom line
Before employing Bibby to take charge of his business finances, Michael found that he was struggling with debtors who were consistently paying invoices outside of 30 days.
"Prior to Bibby, I was forced to offer debtors significant settlement discounts to encourage their prompt payment.
"Collectively, these discounts would reduce our bottom line significantly.
"With Bibby, we receive cash valued up to 90% of our invoices within 24 hours which eliminates any potential cash flow crises we encounter during demanding times," Michael said.
"We chose Bibby because we wanted to control our financial position as well as to free up our time to focus on the strategic direction of the business.
"Although we have only been with Bibby a short time I have noticed an increase in management productivity and look forward to future growth.
"I am confident in Bibby's flexibility for growing with the business and now have new confidence in my own business decisions because we are no longer held hostage to our cash flow," he said.
The actual names of the entities and individuals in this case study have been withheld for privacy reasons.