New Customer: 01244 525410 / Existing Customer: 01244 527300
  • Views from the flipside

    Improve your Cash Conversion Cycle with Asset Finance

    Tell me more

Views from the flipside

The Cash Conversion Cycle (CCC) shows the length of time, in days, that it takes equipment suppliers to convert stock into cash flow. It measures the amount of time the value of the stock is tied up in the production and sales process before it is converted into cash through sales to customers and it is an important metric for equipment suppliers when managing their cash flow.

Cash Conversion Cycle - Before Asset Finance

Cash Conversion Cycle before Finance

The above diagram illustrates how the CCC measures the amount of time needed to sell equipment, the amount of time needed to collect receivables and the length of time the company has to pay its bills without incurring penalties.

Equipment suppliers must strike a delicate balance - the longer they take to pay their creditors, the more money the supplier has on hand, which is good for working capital and frees up cash flow. However, if the supplier takes too long to pay its creditors, the creditors will be unhappy and may refuse to extend credit in the future or offer less favourable terms.

Download our White Paper

Reducing the Cash Conversion Cycle through Asset Finance

Suppliers often have phased delivery/install and additional costs that require payment before the project is completed. Typically these are self-funded through their cash flow causing strain. With asset finance the project can be broken into phased payments for the customer, with the supplier receiving payments from the finance company; removing the cash flow difficulties and reducing the cash conversion cycle:

Cash Conversion Cycle - After Asset Finance

Cash Conversion Cycle after Finance

By offering asset finance as a payment option to their customers, equipment suppliers can reduce their CCC. The example above shows how introducing asset finance brings a reduction of 25 days, improving both cash flow and the bottom line.

The benefits of offering finance to your customers, do not just stop there. Customers that use asset finance provide suppliers with the ability to only order stock once the finance has been confirmed and order signed, therefore reducing the cash out to cash in timeframe even further.

Also, as some creditors give suppliers a discount for timely payments, equipment suppliers could benefit yet again.


This is an excerpt from our white paper, download Winning More Business: Offering finance to your customers to learn more. Discover how the LDF Partner Programme can help you reduce your cash conversion cycle, increase sales and protect margins.

By Rob Hulse
Author
Find me on:

Why choose LDF?

  • No red tape, so you can receive funds in as little as 24 hours
  • We accept 4 out of every 5 applications
  • Apply quickly and easily with E-sign loan documents
  • You’ll always speak to the same person
  • Free up cash flow for other areas of your business
  • Tailored finance agreements to suit your specific needs
Find out more

Views from the flipside

What our customers say

We could not have been happier. Banks as usual were a nightmare - they took over six weeks to eventually refuse for vague reasons unexplained. LDF were professional, helpful, friendly, and best of all, fast.

CEO Awards 2016 Winner - Flintshire Business Awards Leasinglife Awards 2016 Leasing World Award 2017 SME Awards - Alternative Funder of the YearInnovator of the Year 2016Business Comparison Asset Finance Lender Award Growing Business Award - Amazon