Q: My £190m-turnover telecoms company has grown at lightning speed over the past four years, thanks mainly to acquisitions. But this strategy has put a lot of strain on our liquidity. How can I free up some much-needed cash to fund further expansion?*
A: Congratulations on such stellar growth, particularly during a recession. Your acquisition strategy has given you a real market edge. Now it’s important to get a firm grip on your working-capital processes so that your company can continue its upward trajectory.
If you want to free up funds to acquire new businesses, a key way is to collect receivables quickly and ensure you are paying suppliers to term and not early. That could mean cash is available to you sooner and for longer. Another option could be to negotiate early payment discounts which can be hugely beneficial to both parties. Balancing your cashflow, which adds value to your customers and suppliers alike, is a perfect combination for growth and revenue generation.
Let’s look specifically at suppliers - you need to find a solution that balances the opposing payment interests of you and your suppliers.
Consider talking to your bank. Bond guarantees and indemnities, letters of credit and trade loans are all designed to support supplier/creditor payments.
Another idea is a web-based expense management solution that can be integrated into your existing payment processes. Put to work, it can actually increase your Days Payable Outstanding (DPO) without hurting your suppliers, reserving cash for priority purchases. The real benefit here is complete control over when you pay approved invoices; extended payment periods for you and accelerated payment for your suppliers. This way, you could turn your payables process into a competitive advantage and keep your suppliers on side.
Good luck with your next phase of growth.
Alan Gillies is vice president and head of UK sales at American Express Global Corporate Payments.
LEARN HOW OTHER COMPANIES BOOST WORKING CAPITAL AND IMPROVE SUPPLIER RELATIONSHIPS BY CLICKING ON OUR CASH-FLOW HUB.
Want to discuss your cash-flow pressures? Call 0800 652 1279 or visit americanexpress/corporate to find out more about how American Express Global Corporate Payments can help your business.
* This is an example question