Case Study
Invoice Finance guards payroll for security firm
Managing cash flow mismatch a stretch
Employing security personnel is a growing priority for businesses and event organisers throughout the world. For companies such as AVG Security Personnel that assign jobs to and renumerate experienced personnel to supervise residential and industrial construction sites on behalf of clients, business longevity hinges upon a very healthy cash flow that can sustain fluctuating wage demands. Natalie Chambers, Managing Director of AVG Security Personnel, knows only too well the importance of having a consistent and reliable cash flow that can handle cyclical upturns, especially within the construction industry notorious for its lengthy credit processes.
The construction industry operates on a 60 or 90 day invoice payment cycle which places considerable pressure on suppliers such as AVG who generally have a seven day period in which to pay their employees.
According to Ms Chambers, staff levels contracted by AVG can fluctuate anywhere from five to 60 on any given day which means a high cash flow buffer must be maintained in order to renumerate guards called to jobs at short-notice. It also means that payroll operations can be very involved and complicated.
The payment cycle mis-match meant Natalie was constantly chasing AVG debtors in order to maintain enough cash flow to remunerate employees. She required a financing solution that could combat the inefficiency, and found it from Bibby Financial Services in the form of Cash Flow Finance, also known as debtor finance, factoring or invoice finance.
Cash Flow Finance helped boost recruitment
AVG Security Personnel was introduced to Cash Flow Finance by their accountant. After conducting considerable research into Cash Flow Finance and its operatives, AVG selected Bibby.
Cash Flow Finance provides a flexible source of finance by allowing businesses to unlock the funds tied up in unpaid invoices – leading to an immediate injection of cash.
With Cash Flow Finance, businesses send a copy of their invoices to Bibby who then converts up to 90% of the unpaid invoices into cash within 24 hours. Businesses can draw down on this fund pool at an interest rate. Once the debt has fully been collected by Bibby, the remaining 10%, less a fee, is transferred from Bibby to the business.
The major benefit for AVG from using Cash Flow Finance is an immediate injection of cash flow – the lifeblood for any maturing business and one that has boosted Natalie’s ability to recruit quality employees.
“Our enhanced ability to pay employees promptly means we can demand higher standards than those who are compromised by a slower cash flow.”
Another obvious advantage of being able to draw down on up to 90% of invoices immediately is that payments such as tax can be managed promptly and not relegated to make way for payroll obligations.
“Invoice Finance allows us to focus on the future of our business.”
The actual names of the entities and individuals in this case study have been withheld for privacy reasons.