Title: Factoring: the perceived role in cash management for New Zealand SMEs

Authors: Herb De Vries

Addresses: School of Business, Christchurch College of Education, Dovedale Avenue, PO Box 31 065, Christchurch, New Zealand

Abstract: This study presents an investigation into stakeholder understanding and perceptions of factoring as a cash management tool for small and medium sized enterprises (SMEs). A literature review confirmed that factoring can benefit SMEs cash-flow and debtor management, but also identified that its under-utilisation or improper use may stem from misunderstandings and perceptual blocks held by stakeholders making cash management decisions (i.e. SME owner/operators, business advisors and factoring companies). Therefore, research was undertaken which: investigated factoring utilisation analysed patterns and themes with respect to perceptions in the marketplace developed a model of factoring perception. The study confirmed that there was a general agreement in the marketplace that factoring is under-utilised, poorly understood and suffers from a poor image. From the findings, a factoring maximisation model was developed, demonstrating how perceptions should be changed in order to maximise factoring|s effectiveness in the New Zealand marketplace. These findings are useful in guiding factoring companies engaged in promoting factoring in the marketplace. It also highlights the deficiencies in SME owner/operators| and business advisors| understanding of factoring which is limiting their ability to optimise their cash-flow financing decisions.

Keywords: factoring; SMEs; finance; cash flow; cash management; New Zealand; small-to-medium sized enterprises.

DOI: 10.1504/IJESB.2004.005665

International Journal of Entrepreneurship and Small Business, 2004 Vol.1 No.3/4, pp.363 - 379

Published online: 10 Nov 2004 *

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