Podcast

How to strengthen your business’s financials

Kevin Higgins is the executive director at Vantage Performance, and he is passionate about creating more resilient businesses. When it comes to the ins and outs of financing, Kevin is an expert.

In this episode of Flying Solo, he shares all the tips you need to know to help you put your business in the best position to access finance. He understands that one of the main challenges in securing funding is the lack of clear visibility and timely information provided to funders. Kevin shares invaluable insights on managing working capital, the role of banks in funding peaks and troughs, and the importance of accurate and well-articulated financial forecasting.

Key topics

Importance of a Secure Balance Sheet

– Funders rely less on personal assets with a secure balance sheet

– Be cautious when giving personal guarantees

– Negotiate to remove personal guarantees if possible

Managing Working Capital and Cash Flow

– Working capital includes debtors, creditors, and stock

– Banks evaluate debt collection efficiency and stock turnover

– Maintain a tight cash conversion cycle

– Banks fund peaks and troughs in working capital

Creating Accurate Forecasts

– Lack of diligence in forecasts can be a problem

– Banks and funders perform what-if scenarios

– Visibility and knowledge of numbers are crucial

– Three-way forecasts (P&L, balance sheet, cash flow) are important

Strategies for Financial Health

– Focus on paying down debt and lowering debt

– Strengthen the balance sheet by reducing debt

– Evaluate viability before considering funding options

Increasing Resilience and Confidence

– Resilience increases chances of survival in economic headwinds

– Factors of resilience include sales conversion rate, cash flow management, and knowing strengths

– Demonstrate resilience for creditworthiness and lower loan pricing

– Have a clear business plan and involve the management team

Building Trust

– Regular communication and honest conversations with funders

– Flexibility and trust are important criteria for funders

– Develop ongoing dialogue and trust with bankers

– Confidence is key in securing funding

Timestamped overview

[00:01:23] Funding challenges stem from lack of visibility.

[00:04:04] Monitor working capital, improve cash conversion cycle. Sense check assumptions in financial forecasts.

[00:08:05] Debtors, debtor days, management team, ideal customers, consolidated creditors.

[00:12:01] Test companies’ resilience with a score of 50. Low scores indicate possible failure in the future. Improving resilience boosts confidence with banks. Key factors include sales conversion rate and cash flow management. Identify business strengths to avoid overextension.

[00:15:33] Focus on paying down debt to strengthen balance sheet.

[00:19:12] Successful strategy requires good people and adaptability, knowing numbers.

[00:20:59] Accounting packages provide monthly financial reports.

[00:26:23] Funders need to be flexible and trustworthy.

[00:30:38] Strengthen business, avoid high interest rate loans.

[00:32:16] Caution among lenders as economy recovers.

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