Ivan Fox, InvoiceFair Chairman, shares some insight into asset trading
The purpose of any business is to generate net cash receipts. Profits are of course important but they are subject to accounting policy and opinion. The providers of capital ultimately require cash remuneration.
In simple terms there are three ways to increase cash generation within a business:
· Sell more goods and services;
· Charge more for goods and services provided;
· Increase asset turn.
In seeking to drive sales and pricing a business is up against factors outside of their direct control such as the economy and competitive market forces. Driving asset turnover is directly within the influence of management.
Asset turnover is a key efficiency metric in any business. It clearly demonstrates how good a business is at driving a return from what it already owns. There is no fixed rule for what constitutes a good or bad asset turnover ratio, so this metric should always be compared to industry standards and the ratios of other companies that are similar in size. Certain industries such as capital goods manufacturers are inherently capital intensive while others such as online software sales are capital light.
In general, a high ratio indicates that the company is making good use of its existing assets. A low ratio is an indicator either of low sales or that the business has over-invested in land or equipment that isn’t benefiting the bottom line.
Invoicefair provides a company with a capital market solution that allows management drive asset turn and improve cash-flow efficiency within their business.
Single Invoices are sold via auction to a pool of professional buyers. The seller of the invoice sets a reserve capping their cost of credit. The ultimate cost of credit is determined by the bidding of buyers. As a company’s track record of selling invoices on the Invoicefair platform builds this ultimately delivers an improvement in the cost of credit. This is very empowering. Cash is generated through an asset sale, therefore, there is no additional debt on the balance sheet. The company is in charge. It decides if and when they want to sell an invoice, not the bank. As Bill Gates once said – People need banking. They don’t need banks.
Cash can be unlocked and put to work in less than 24 hours via the Invoicefair platform. This has a profound impact on asset turn as the company’s balance sheet is being liquefied as opposed to expanded through taking on additional debt capital.
Since commencing trading in April 2015 Invoicefair has funded Euro 250 million of working capital across a variety of sectors.
For a fast and efficient consultation on how we can accelerate your cash flow contact the business development team at – Sorcha@invoicefair.com