Making working capital work

Posted on June 1st, by editor in Caring Times. No Comments

Recently the managing director of an expanding homecare business employing more than 60 people received a note from the local authority treasury department stating that an internal error had resulted in all invoice payment being delayed by up to four weeks. The result was panic and sleepless nights. This homecare business had recently secured a block contract, hired new carers, invested in new premises as turnover grew by almost 100 per cent in a matter of months. This sounds like the epitome of a thriving entrepreneurial business – indeed it is that. The challenge, however, was that no provision had been made for any material delay in invoice payments, resulting in a severe cash-flow problem. This may be termed “over-trading” or even “under-capitalisation”. “A bloody mess,” was term the business owner used. “I have to pay the carers I employ weekly and cover office overheads weekly. I submit invoices fortnightly but they take up to six weeks to get paid. Bridging that gap keeps me awake at ni

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