invoice finance Archives

How Octet empowered a homecare services company with working capital finance

Posted on September 19, 2024September 24, 2024 by Russell Walsh

In an industry where care is paramount, ensuring financial sustainability can often be a delicate balancing act. For an Australian homecare services company, this balancing act became increasingly challenging as the business expanded across the country. Despite a mission-driven approach to revolutionise in-home care, the company faced significant financial hurdles, particularly in managing cash flow. With the help of Octet Finance, this company was able to stabilise its operations and continue its vital work, demonstrating the critical role of working capital finance in supporting businesses in the health and aged care sectors.

Establishing the business and planning for growth

The company was established in 2016 with a vision to transform the homecare industry. Offering a broad range of in-home services — including personal care, companionship, assistive technologies, pet care, and transportation — the company aimed to help its members maintain their independence and quality of life. One of the company’s most innovative features is its technology-driven approach, which empowers members to monitor their health, track care schedules, and manage their expenditures.

However, as the business expanded rapidly across Australia into most major cities, it faced significant financial pressures. Despite a 50% increase in revenue from 2022 to 2023, the company had incurred losses for four consecutive years, reflecting the intense cash flow challenges typical in the aged care sector. Operating on a model where independent contracted carers set their own rates within suggested guidelines, the business found it difficult to balance affordability for members with fair compensation for the carers.

With the services increasing to over 35,000 in-home care activities per month – ranging from physiotherapy and nursing to lawn mowing and shopping services – one of the biggest challenges was cash flow management. The company needed to meet weekly operational expenses, but the monthly payments from the Federal Government’s Home Care Package Program created a significant cash flow gap.

Accessing working capital to ease cash flow pressures

Recognising that traditional lending solutions might not address these specific needs, the company’s commercial banking partner suggested exploring working capital finance options, particularly receivables financing, to bridge this gap.

Through the banker’s recommendation, the home care services company was introduced to Octet Finance’s Queensland Director of Working Capital Solutions, Allan Howe.

Understanding the business’s unique challenges and growth potential, Allan structured a $5 million debtor finance facility. Debtor finance, also known as invoice finance, allowed the company to unlock the value of its unpaid invoices, turning these future receivables into immediate cash. This was crucial for a business that operated on tight margins and relied on regular, timely payments to meet its obligations. With the influx of working capital, the company could cover weekly operational costs, including payments to carers and other essential expenses such as technology upkeep, marketing efforts, and administrative overheads.

“This solution provided the liquidity needed to manage weekly operational costs while waiting for the monthly government payments,” said Allan. “By smoothing out these cash flow fluctuations, the company could avoid the stress of having to defer payments to suppliers or delay critical investments in its growth.”

The impact of this working capital finance solution was immediate. With access to the necessary funds, the company could continue to pay the carers on time, maintain service quality, and support its ongoing growth. The financial flexibility provided by Octet’s facility meant that the business could focus on delivering high-quality care to its members without the constant strain of cash flow concerns.

Achieving the balance between financial stability and sustained growth

The partnership with Octet proved to be a turning point for the homecare services company.

“The stability provided by the debtor finance facility not only alleviated cash flow pressures but also allowed the business to sustain its growth across multiple regions,” explained Allan.

The availability of immediate funds allowed the business to confidently enter new markets, secure in the knowledge that it had the financial backing to support its growth initiatives. This included onboarding more carers, investing in advanced care technologies, and enhancing marketing efforts to attract new members.

The ability to consistently pay carers on time was particularly significant. In an industry where trust and reliability are paramount, ensuring that these independent contractors were compensated promptly helped maintain strong relationships and a high standard of care for members. This reliability, supported by the working capital facility, became a competitive advantage, allowing the company to attract and retain top-tier carers, further enhancing the quality of services provided.

The collaboration between the banker, Octet, and the homecare services company demonstrates how the right working capital finance solution can empower businesses to navigate financial challenges, sustain growth, and continue their mission-driven work. For this Australian homecare services company, Octet provided not just a financial solution, but a lifeline that enabled them to focus on what they do best — caring for their members.

Grow your business with Octet

Via our Referral Partner Program, Octet empowers businesses across a range of industries, including healthcare, labour hire and transport, offering innovative Debtor Finance and Trade Finance working capital solutions.

Speak to our team of working capital specialists to see how we can power your business growth today.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

How to improve cash flow in your business

Posted on July 12, 2024September 27, 2024 by Duncan Khoury

Maintaining a healthy cash flow in an unpredictable economic climate is crucial for business resilience. Doing so ensures your business can meet its financial obligations and seize growth opportunities, but improving cash flow in business can be a challenge in many industries.

In this article, we provide practical information on business finance to improve your cash flow, helping your company not only survive but thrive in these more difficult economic conditions.

How to control cash flow in business

Cash flow is the lifeblood of any business, representing the movement of money in and out of the company.

Sam Ralton, Octet’s Director of Working Capital Solutions, VIC, TAS, SA, explains, “The importance of cash flow is the ability to pay for goods and services when they fall due. Profit is a snapshot of how much money the company’s earned after expenses, but that doesn’t mean that the cash flow is in a healthy position.”

In fact, many companies confuse high profit with good cash flow. While the two are somewhat intertwined, improving cash flow in business is much more about forward thinking, planning and strategy.

“In a growing business, cash flow management gets increasingly harder because although you may have good margins and you’re making a profit, there’s a lag in time before that money is available to you, and therefore the cash flow runway is restricted,” Sam explains.

Cash flow runways and forecasts

A cash flow runway is the period a business can operate before it runs out of money. Having a clear understanding of your cash flow runway helps you plan and ensures the business can cover its expenses for a set period.

Cash flow forecasts are equally important as they predict future cash inflows and outflows, allowing businesses to prepare for potential shortfalls. “Cash flow forecasts are a good tool and indicator of when your business can pull certain growth levers or, conversely, restrict unnecessary spend,” says Sam. “They’re essential to ensure you don’t spend money today that you may need in the near future.”

So, what are some practical strategies for managing your business cash flow opportunities and issues?

6 simple strategies for improving cash flow in business

Review pricing structures: Ensure pricing covers your costs and desired profit margins. Regularly review and adjust prices to reflect market conditions.
Increase sales: Implement more layered brand marketing strategies and explore new markets and product verticals to boost revenue.
Control expenses: Regularly review expenses to identify and cut unnecessary costs.
Faster payment collection: Implement stricter payment terms and follow up on overdue invoices promptly using appropriate accounting software.
Inventory management: Utilise technology to maintain optimal inventory levels, reduce any holding costs and free up cash.
Supply chain management: Negotiate better terms with suppliers to improve cash flow timings. Where it makes sense for your business model, early payments can sometimes create opportunities to discuss discounts with appropriate suppliers.

Explore our recent article on managing cash flow strategies to find out more.

Business cash flow solutions for working capital finance

Working capital finance products like debtor finance (also known as invoice finance) and trade finance can significantly improve cash flow.

Debtor Finance cash flow benefits

Debtor finance provides an instant cash injection by unlocking funds tied up in unpaid invoices. This liquidity helps cover operational expenses, supplier payments and even fund growth opportunities.

Sam advises, “Debtor finance can give you the cash flow required upfront. So if you need funds earlier, you’ve got the certainty of borrowing against your invoices rather than waiting for those payments to arrive under the original terms.”

Businesses that access debtor finance can execute more effective financial plans by better managing cash flow fluctuations and the uncertainty associated with extended payment terms or delayed payments.

Unlike traditional loans, debtor finance requires no personal assets as security. This flexibility allows you to access funds when you need them, without risking valuable assets.

Trade Finance cash flow benefits

Trade finance offers substantial cash flow benefits by providing a tailored line of credit that bridges the gap between purchasing and selling goods. This funding solution ensures that businesses do not have to tie up their cash flow in inventory that takes weeks to arrive, process and sell.

By introducing a financial partner, such as Octet, into the supply chain, businesses can access funds to pay suppliers immediately, whether they are local or overseas. This enables the business to maintain healthy cash flow, as they can repay the credit facility over time rather than having their working capital tied up in these often lengthy transactions.

Because you can set a competitive exchange rate for the transaction upfront, trade finance can also safeguard against currency fluctuations. This supports smoother and more predictable financial management and helps increase your business’ purchasing power.

Where to go for business cash flow solutions

Implementing effective cash flow management strategies and leveraging working capital finance products can help you confidently navigate economic uncertainties. But staying on top of business cash flow and utilising these strategies and products can be a complex exercise, even for the most experienced of operators.

That’s why seeking professional advice is often a good idea. Financial planners, accountants, commercial finance brokers and business finance experts can all provide valuable insights and tailored solutions. For earlier growth stage businesses, it’s really important to consult widely in order to find the most suitable cash flow advice for your unique business circumstances.

Keep your cash flowing

Improving cash flow is essential for business stability and growth. At Octet, we’re here to support your business at every stage, offering expertise and financial solutions tailored to your needs. Our working capital products are designed to help businesses in all industries manage cash flow effectively.

Our team can provide guidance on leveraging innovative supply chain finance solutions and tools to maintain consistent cash flow, crucial for sustaining and growing your business in these challenging conditions.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

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