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Receivables Finance

Improve cash flow by converting contracts’ receivable into cash

Some suppliers may wish to recognise revenue for costs associated with customer contracts. This could be an outsourced agreement whereby the supplier provides the customer with access to a desired solution without the need to purchase the specified products and services.

The customer is bound by a contractual, service-level agreement that states the performance and quality metrics of the relationship with the supplier. A minimum monthly payment is payable over an operational period. Receivables finance terms can be embedded within the supply contract to assist the supplier’s cash flow by purchasing part or all of the payment stream and providing the vendor with immediate Sarbanes-Oxley compliant revenue.

This is intended to address IFRS 16 Leases announced and published by The International Accounting Standards Board (IASB). The new standard which comes into effect on 1 January 2019, requires lessees to account for their leases under a single accounting treatment, bringing almost all leases ‘on balance sheet’ and recognising a right of use asset and a lease liability.

Under these regulations, customers can treat their monthly repayments as an operating expense and the facility structure remains off-balance sheet.

For suppliers, funding availability increases as sales do making Receivables Finance an effective solution to support business growth.

Benefits

Customer Benefits:

  • Payments can be spread to coincide with contracts of up to 10 years
  • Customers can conserve much needed cash-flow for other projects
  • Payment terms can be tailored to suit customer's requirements

 

Supplier Benefits:

  • Improved cash-flow during the early stages of new contracts
  • A positive effect on client retention as clients may consider contracts over a longer period
  • Potential increase in orders due to the more flexible payment options than may be currently available
  • Fully compliant with all PFI/PPP guidelines and legislation
  • Receivables finance facilities are available from £75,000 upwards

 

Receivables Finance

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