How finance can help a business embrace digital technology?

Businesses that are digitally enhancing operations are growing quicker and investing more readily in technology. However, finances must always come first.

Australia’s business landscape is full of risks and opportunities, particularly for small companies. A 2013 Deloitte study found that “highly digitally enhanced” small businesses are twice as likely to be growing in revenue than those that are not making the most of modern technologies. They’re also earning twice as much in revenue per employee than their lagging competitors.

Digital-first companies are four times more active in the recruitment landscape and certainly aren’t resting on their laurels. In fact, three times as many businesses that are focused on digital enhancement have growth as the main business objective, compared to others.

The gap is growing bigger, too, and those who aren’t investing are likely to see the chasm between themselves and their digital-focused competitors getting ever wider. The latter enterprises are again three times more likely to increase their investments in digital over 2016 and into 2017.

Costs and Cashflow

However, investment of any sort comes at a cost. From mobile app development to servers and wider IT infrastructure, harnessing the capabilities of a digital world hasn’t come cheap. It’s left many businesses unable to keep up if they don’t have the capital requirements to invest in new equipment, skills, training, and resources, while others sit on the fringe, waiting for a chance to spend and take more market share.

To be in a position to capitalise on the opportunity to digitally enhance operations, businesses need to ensure their equipment is not redundant and their cashflow is optimised for investment. After all, the Australian Securities and Investment Commission says that the majority of business failures in 2015 once again came down to finances.

“Inadequate cash flow or high cash use” was the top reason for companies closing their doors for the last time. A huge 44 per cent of failed businesses (big and small) named this as a deciding factor for closure – a rise on the 41 per cent a year previously.

So whilst the digital world is offering stunning results for start-ups and experienced companies alike, finances must come first.

The Options

Equipment finance may be a great tool for a business wishing to refurbish their existing premises or acquire the latest technology for their warehouse or office. Avoiding the outlay of the upfront cost through monthly repayments allows businesses to effectively manage their cashflow.

Debtor Finance, also known as Invoice Discounting, is a cash flow finance solution that provides an advance of up to 85% against outstanding invoices. The key perks of this finance option are that the business has prompt access to funds without the need for real estate security, and the funding limit grows in line with sales.

Integrated Finance seamlessly combines Equipment Finance and Debtor Finance to raise working capital, where either finance option alone might not be enough to raise sufficient funds.

With just over a month before the end of the financial year and attractive accelerated depreciation measures still available to eligible small businesses, now is an opportune time to consider all finance options. Whether it’s ensuring sustainable cashflow management through Debtor Finance or upgrading business critical equipment on finance, business owners will need to look at their growth strategy, and plan ahead to get ahead.

David Wright is an experienced business finance specialist with Classic Funding Group, an Australian owned finance company providing innovative asset finance solutions to SMEs since 1992.