Short Term Debtor Finance: Case Study

Case Study: Precision Print Solutions – Managing Cash Flow with Short-Term Debtor Finance for Wages

Background

Precision Print Solutions is a fictional commercial printing company based in Melbourne. Known for its high-quality print materials and reliable service, the company caters to a variety of clients, including marketing firms, retail chains, and event organisers. Due to its reputation for quick turnaround and quality, Precision Print Solutions has grown its client base significantly over the past year.

Problem

Precision Print Solutions recently secured a large contract with a national retailer for a series of high-volume promotional materials. While this contract was a huge win, it created an immediate cash flow challenge. The contract terms specified a 60-day payment window, meaning Precision would not receive payment for their services for two months. However, the increased workload required Precision to bring on additional temporary staff and cover regular wages for their full-time employees, creating an urgent need for cash.

With upcoming payroll deadlines and insufficient cash reserves to bridge the gap until the contract payment, Precision Print Solutions was at risk of losing skilled workers if it couldn’t meet wage obligations. Traditional loans or overdrafts weren’t feasible solutions, as these would take too long to process.

Solution: Securing Short-Term Debtor Finance

Precision Print Solutions turned to short-term debtor finance, a form of financing that allowed them to access the cash tied up in outstanding invoices. By securing debtor finance, Precision was able to:

  1. Access Immediate Funds Against Outstanding Invoices: The financing provider advanced a percentage of the value of their unpaid invoices, ensuring Precision had cash on hand for wages without waiting for the 60-day payment term.
  2. Cover Payroll Obligations on Time: The immediate cash flow injection allowed Precision to meet payroll deadlines, keeping both full-time and temporary staff paid and motivated.
  3. Maintain Smooth Operations: With wages secured, Precision could focus on completing the large contract without the distraction of cash flow concerns, ensuring the work remained high-quality and on schedule.

Implementation and Outcome

Within a few days of applying for debtor finance, Precision Print Solutions received an advance on the unpaid invoices. This allowed them to:

  • Pay Employees on Time: Precision was able to meet payroll obligations in full, maintaining morale and workforce stability.
  • Retain Skilled Temporary Staff: The cash flow boost enabled them to retain their temporary staff for the duration of the contract, ensuring they could meet the high-volume order requirements without sacrificing quality or deadlines.
  • Complete the Project Smoothly: With cash flow no longer a concern, Precision focused on delivering the project, earning positive feedback from the client and strengthening their business relationship.

Results

By using short-term debtor finance, Precision Print Solutions achieved the following outcomes:

  • 100% Payroll Compliance: Precision was able to cover all wages on time, avoiding any employee turnover and maintaining workforce stability.
  • Increased Productivity and Client Satisfaction: With a stable and motivated team, Precision completed the large contract on time, which led to a follow-up project from the client.
  • Sustained Cash Flow for Future Growth: By smoothing out cash flow with debtor finance, Precision was able to avoid traditional debt, leaving them financially flexible for future projects.

Conclusion

Precision Print Solutions successfully used short-term debtor finance to overcome a temporary cash flow gap, meeting payroll obligations and ensuring operational stability during a critical project. This case illustrates how debtor finance can empower businesses with lengthy payment cycles to manage cash flow and fulfil obligations without delaying growth.

Key Takeaways:

  • Debtor finance is a valuable tool for businesses with long payment terms, enabling access to funds tied up in invoices without waiting for client payments.
  • Maintaining cash flow for payroll helps retain skilled staff, which is critical for completing high-demand projects on time.
  • Flexible financing solutions like debtor finance can provide immediate working capital without adding long-term debt, keeping the business agile for future opportunities.

For Precision Print Solutions, short-term debtor finance was essential to bridging the gap between invoicing and payment, ensuring they met payroll and delivered top-quality work on schedule.

Fictional names have been used to protect clients privacy.

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