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How an Auction Can Improve Business Cash Flow

Auctions can help many companies avoid filing for business rescue by securing a non-loan capital injection to correct negative cash flow issues and continue operating.

That’s the word from Park Village Auctions’ Director and Head Auctioneer, Clive Lazarus, who overseen hundreds of business rescue and liquidation matters during PVA’s 39-years in auctioneering.

Lazarus: “A large majority of the business rescue matters that we oversee need not reach that point.

“The owners or managers merely need to raise capital—without incurring debt from loans—to buy them time to implement better cash flow strategies in the business. Such strategies being reducing costs, increasing turnover and optimising efficient application of resources.

“While restructuring the business to improve efficiencies, owners can identify superfluous or redundant assets for disposal by auction.”

According to Lazarus, auction represent the ideal method of disposal for numerous reasons:

  • An auction sale (be it public or online) is a useful outsourcing model that enables a business to focus on its core activities while converting the assets into cash.
  • There are no selling price negotiations. Bidders know the market-related value and a pre-determined budget. They bid as they see fit.
  • The lead time to realise the cash is much shorter as the assets are considered sold on the fall of the hammer.
    • There are no suspensive conditions.
    • There is a finite period in which buyers must settle.

In light of their extensive experience and their position as professional valuators, PVA is often called an advisory role in business rescue matters (over and above facilitating disposal of assets).

Lazarus encourages those who feel the pinch of the current economic downturn to consider making changes to run “lean” rather than risk selling or closing their business.

“We want to see as many South African businesses survive this storm as possible. A few small, but smart changes in business operations and processes can make all the difference. We are more than happy to engage business owners and help them realise locked up capital in their business.” Lazarus concludes.

For more information about business restructuring and asset disposal, visit parkvillageauctions.co.za or email auctions@parkvillage.co.za.

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