The AC Phoenix
March 2003
Page 13
ACCELERATE YOUR “COMPANY’S CASHFLOW” THROUGH FACTORING
Continued from Page 1
simply, the cash you need to pay your bills
and grow your business is being heid by your
customers - - in accounts receivabie.
As frustrating as it is to always be short of
cash, there is a bigger probiem. if you can’t
grow to serve your market then it is iikeiy that
someone eise wiil move in and exploit your
opportunity. Or, the market opportunity itseif
may have a short iife. The oid saying “make
hay whiie the sun shines” is never truer than in
this case. Missing, or not fully exploiting, a
market opportunity could cost you millions of
dollars.
So what is the solution? Before we get into
the solution, let’s understand what is truly
happening to your cash flow. In today’s
competitive business environment, business
customers expect certain benefits for their
dollars. If your company cannot provide such
benefits, you can be rest assured that there are
other companies able and willing to provide
them. One of the benefits that most business
customers expect is the extension of net
terms. Extending net terms to your business
customer gives your customer financial flexibility.
Rather than having to pay you when product or
services have been rendered, your customers
has 30, 45, 60, or more days to use your
money for other immediate profitable
opportunities.
The negative for you is simple. In essence,
you are acting as a bank. However, unlike a
bank you are not earning interest on money
that you are lending. By lending this money to
your customer you are losing out on the
opportunity to use these funds for growing
your own business. In most cases, offering net
terms severely hampers a company’s cash
flow. In order to prevent this from happening
companies look to several key options. They
are as follows:
• Traditional Bank Financing - The most
common way companies protect themselves
from a lack of cash is to borrow money from
the bank. Banks are an excellent solution for
all businesses that are bankable and have
small to moderate growth. Most companies
take advantage of lines of credit and use it to
finance growth projects. The key negative here
is that lines of credit are in theory short-term
debt, but many companies become highly
leveraged quickly which hurt the overall
position of the businesses. Moreover, for
companies that are experiencing steep growth,
the line of credit may not be sufficient to fund
their growth and banks normally do not
increase lines of credit often without a period
of sustained growth and financial success.
Traditional bank financing is not available to
the majority of small businesses because of a
lack of established business history and/or
financial track record.
• Demanding C.O.D payments - Companies
that are growing and have a heavy need for
cash may simply decide nof to offer terms to
their customer base. However, with other
competitors available, C.O.D payment
requirements may reduce the number of
businesses that are willing to use your
company as a vendor or supplier. There are
simply too many businesses in the market that
are willing to offer your potential customer this
standard benefit.
• Discounts for early payment - Companies
give as much as 5% to 10% discounts to
clients who can pay within 1 to 10 days of
invoice date. However, the problems with
discounts are the fact that they are difficult to
enforce and if you do deprive a customer who
has received such discounting in the past, you
can create some ill-will if you deny such a
discount. In fact, many companies who offer
discounts will tell you that they have a few
“big-time” customers that will take the
discount and pay within regular terms. This
does not help out your situation.
So, finally, what is the solution? Today more
and more companies are deciding to finance
their receivables. Through a process called
factoring you can convert your accounts
receivable to cash and unlock your cash flow.
By financing your accounts receivable through
a factor, you provide your business with a
steady, reliable stream of cash. No more anxi
ety over missing payroll, no more calls from
vendors and suppliers looking for payment,
and no more missed market opportunities. By
factoring your accounts receivable you will
always have the working capital you need to
grow your business.
The mechanics of factoring are actually
quite easy. The day after an invoice is created
a factor can advance anywhere from 70% to
90% of the value of that invoice. The percent
age that is not advanced is held in reserve and
paid to your account once the invoice has
been paid. Some companies choose to factor
all of their invoices all of the time while others
factor receivables from a certain customer or
type of customer. Still others who have
seasonal or fluctuating business patterns will
factor very heavily during the buildup to the
busy season and then taper off when things
slow down. Regardless of how a factoring
facility is used, the factor will continue to
monitor, manage and report on all accounts
receivable activity. The factoring fee generally
runs between 2% and 5% of the amount of the
invoice depending on a number of variables.
NCSA DRAMA DEAN GERALD FREED
MAN ELECTED TO BOARD OF THE
SOCIETY OF STAGE DIRECTORS AND
CHOREOGRAPHERS
WINSTON-SALEM - Gerald Freedman, dean of the
School of Drama at the North Carolina School of the
Arts, has been elected to the executive board of
the Society of Stage Directors and Choreographers for
2003.
He joins other prominent industry professionals such
as Susan H. Schulman, Graciela Daniele, Mark Brokaw,
Richard Hamburger, David Petrarca, John Dillon and
others on the board.
The society is a national independent labor union
representing members throughout the United States
and abroad. SSDC has jurisdiction over the employ
ment of directors and choreographers working
on and off-Broadway, in national tours, in resident the
atres, and in summer stock, among others.
Freedman, whose appointment makes him a Tony
Awards voter, made theatre history with his off-
Broadway premiere of the landmark rock musical
“Hair,” which opened Joseph Papp’s Public Theatre in
New York. This is the 35th anniversary year of that
event.
Freedman has directed Broadway productions
including “The Robber Bridegroom”; “The Grand Tour";
the revival of “West Side Story,” co-directed with
Jerome Robbins; and the premiere of Arthur Miller’s
“The Creation of the World and Cther Business.” He
has staged more than two dozen of Shakespeare’s
plays, along with dozens of other world classics, and
was the first American director invited to direct at the
Globe Theatre in London.
During his career, Freedman has directed such cele
brated actors such as Clympia Dukakis, Julie Harris,
Sam Waterston, Patti Lupone, Mandy Patinkin, William
Hurt, Carroll C’Connor and Kevin Kline. He also
directed and helped train not one but two of the recent
Kennedy Center honorees, James Earl Jones and Chita
Rivera.
Freedman, who has been dean of the NCSA School
of Drama since 1991, also serves on the Kennedy
Center New Play Committee and is a member of the
College of Fellows of the American Theatre.
The School of Drama at the North Carolina School of
the Arts offers a four-year professional actor training
program culminating in a Bachelor of Fine Arts or a
College Arts Diploma. In addition, a directing option
prepares third- and fourth-year college students for
graduate studies in directing. A high school drama pro
gram (12th grade only) awards the high school diploma.
Prominent alumni of the School of Drama include Mary-
Louise Parker, Tony Award-winner for “Proof’; Joe
Mantello, Broadway director (“Frankie & Johnny in the
Clair de Lune,”); Kiea Scott, CBS’s “Robbery Homicide
Division”; Diedrich Bader, ABC’s “The Drew Carey
Show”; and Peter Hedges, Cscar nominee for Best
Adapted Screenplay (ABCUT A BCY).