Five ways Recycling companies can get more cash in the bank

Ever wondered how to get more cash into your bank account?

It’s a question we ask ourselves on a regular basis. I recently observed a profitable Cashcompany go out of business because they were not able to service their debt, which was saddening. Even if our business is not in dire straits, the need for sound cash management is still paramount. Good cash management gives us the ability to invest – and if ever there was a time to invest in the environmental sector, this is it.

Method One: Redefine your Debtor Days

I have worked with businesses from a wide range of industries over the years and I often find myself comparing and contrasting recycling & waste companies with those outside of the sector. It has become more and more apparent to me that during periods of growth some organisations can survive or even flourish despite their poor cash-flow management.

A meeting with the owner of one such company highlighted a major concern to me; with a turnover of around £12 million, the company in question completed waste collections and invoiced their customers for the service provided. They gave their customers 30 day payment terms but the average collection period was around 60 days. They had cash in the bank so did not see cash collection as a major concern. However, what staggered me the most was the answer to the next question I posed; “From completing the waste collection, what was the average length of time taken before the invoice was raised?”, “6 weeks” came the response. Yes, 6 weeks, that’s 42 days: add that to the 60 debtor days and the customer was paying for a service over 100 days after it was delivered!

Having composed myself, I enquired further to try and understand why they provide a service but not invoice the customer for 6 weeks. The reason was that the invoicing process was individual to almost every customer, each wanting different information on the invoice documents along with copies of waste transfer notes, driver dockets, job sheets etc. Some wanted an invoice per lift, others wanted an invoice per month. I explained to this customer that if they could produce the invoices on the day the job was completed, or in some cases on the very last day of the month, we could add significant cash into his bank. It is quite a simple calculation:

 Extra cash = no. of days taken out of invoice process X (annual turnover/365)

Even if we only brought forward the invoicing by 5 days, this organisation would add £164,383 to their bank balance. This can only be achieved by having robust and efficient systems in place, and of course a good deal of perseverance. But the key really is to view debtor days as the time from delivering the service to banking the cash.

Method Two: Check your terms

If your suppliers give you 30 days and you pay on time then that is good ethical business. But if at the same time you give your customers 30 days but they pay on 45, then that is risky business. It is common to see negative cash-flow created from by a mismatch between Customer credit terms and Vendor credit terms. Time to renegotiate?

Method Three: Check your weight

We covered above the issue and impact of invoicing late – it impacts the real debtor days figure. We live in an industry where the weight of material collected is commonly a multiplier used to generate the invoice value. If we move the material ourselves, or it comes over our own weighbridge, then that is an easy figure to capture. However, much work in this industry is completed by third parties. In fact, many, if not most, companies in this sector will regularly contract work out but also act as a sub-contractor for other companies themselves.

How often is invoicing your customer delayed as you are waiting for a weight from the contractor who completed the work on your behalf? This is an extremely common reason for delayed invoicing.

Consider this as a scenario; if you say to your contractors our new terms are to pay on 60 days, but if you enter the weight of material into our Contractor web portal on the day you do the movement we will pay you on 14 days, how many will make that effort – I bet it would be the majority. Managed correctly, this can be good for you and your contractor.

Method Four: Finance

Most companies have access to finance, especially on hard assets such as vehicles. This can be an easy and cost-effective way to get cash moving. As long as you can use that cash to generate a greater return than the interest rate charged then you should be in a good position. But be wary of going down the finance route if you are already in a difficult situation as the provider will want a disproportionate return for the perceived risk.

Method Five: Reduce cash tied up in stock

Since the time of Henry Ford producing the Model T businesses have understood Economic Order Quantity (EOQ). This is the principle of considering the cost of buying and holding stock, then reducing those costs to the minimum level required to be able meet your production/sales demand. Of course, in the recycling sector the same principles do not apply, or do they? Many dismiss this concept and argue that they have little control over the input feed – they get the material that comes through the gate regardless, and that they can only ship material out when they have a full load. I’m less convinced, it is time to look again, and there are some smart companies out there who apply supply-chain principles such as EOQ to the decisions they make each day. They look at the rate of stock turn and the cash tied up in that stock. If you have bales of black plastic bags sat around for months, it is unlikely to impact cash-flow as it is such low value (though it can curtail your operations if you are limited by space or tonnage restrictions). But if you are carrying significant amounts of copper just for a few days it can have a significant impact.

As an action, you might want to review your inventory, consider the cash tied up, and use this information when making those buy/sell decisions.


As this industry becomes more and more part of the traditional supply-chain we must increasingly apply those supply-chain principles, just like the virgin material suppliers have been doing since Henry Ford’s day. In most business decisions there should be a consideration of the cash impact – and this perhaps requires some education for those people in the business that make those decisions. Taking a lean approach, removing any lag or non-value add time can significantly impact bank balances. Consider the cash tied up in stock – how long has it been there and how soon can you release it? A cash-aware business with efficient supply-chain systems should flourish as moves from intensive care to ready to invest and fully fit for business.



Buying Software for your Business? A few simple rules…

Many people selecting a new piece of business software have been involved in software projects before. They remember the dreamy vision painted by the software seller, they had expectations that the solution would fix all their problems, that the implementation process would be as smooth as slipping on a silk glove and that life would suddenly be wonderful.Top Technology The reality was often quite different. In surveys around 75% of software implementations either failed to deliver the agreed objectives, drastically exceeded the budget or were delivered long past the intended go-live date. Continue reading

Big Data

Big Data is omnipresent, yet relatively unknown. It is a technology that affects our everyday lives in so many ways, though most of us do not know it exists. In this blog I attempt to uncover a phenomenon that has become pervasive in many aspects of life and is now impacting, amongst others,  the waste, recycling and environmental sectors.

Before offering some insight into what Big Data is, let’s put forward a few examples that are easy to relate to: A 20’s something female updates her relationship status on Facebook from single to engaged.  She then begins to see subtle (and sometimes less than subtle) advertising for wedding dress shops, romantic holiday destinations and even hotels in her home vicinity that offer the full wedding package. Now, Facebook do not BigData word cloud smallemploy huge teams of data ninjas that monitor your every change in circumstance to then present you with appropriate advertisements, they employ Big Data. Recently, a piece of research from Cambridge University and Microsoft across 58,000 volunteers demonstrated a remarkable ability to predict a person’s age, gender, political affiliation and even sexual orientation just from their “Likes” on Facebook. Apparently clicking “Like” on subjects such as “Britney Spears” or “Desperate Housewives” were among the signs of homosexual orientation! Continue reading

Look, No Cash!

To address the issue of metal theft, the government has amended various bills to implement a cashless system for purchasing in the scrap metal industry. Here I look into the implication of this and how companies need to focus on their IT systems to make it happen, particularly in light of key exceptions.

Metal theft has rapidly become a scourge on our industry, with public sympathy focusing on the victims and eyeing anyone involved in the industry with distrust. The recent amendments to the Bill announced in May and due to come into force in August are generally welcomed in the industry as they offer scrap metal merchants the opportunity to confirm their honesty and integrity. However, the system won’t be foolproof as the Government has had to provide exemptions for itinerant scrap metal collectors who often have no way of receiving payment via any other means than cash. Continue reading

Top 5 Technologies for Recycling & Sustainable Energy Companies in 2012

Out with the Old, in with the New

For many businesses, investment in new IT has been somewhat low on the list of essentials over the last year or two. Despite this, in the hi-tech world, the likes of Microsoft, Apple and Google have seen the pace of new developments increase further and faster than ever before. Jason Fazackerley takes a look at why many businesses now have an Top Technologies for 2012opportunity to take advantage of newer technologies. Can these technologies bring real commercial benefit and allow them to make 2012 a springboard to success? And if some IT budget becomes available, where should IT Directors and CIO’s spend it? Continue reading

Acquire or Acquired; having the right IT systems ensures you realise best value

Company A – The Acquired: You spend years building up your business; you make sacrifices, many of them personal as you put business before family, leisure and sometimes health. It is a familiar tale and when one decides that the time has come to sell-up you want, and deserve, to get the best value you can for your life’s work.
Company B – The Acquirer: You have a reputation for building businesses and your investors expect you to maximise the return on the money that they have entrusted in you. To really perform, you go down the acquisition route. You know there are plenty of businesses out there where owner managers are looking to exit (or stay on with a view to cashing in).

The conventional view for most acquisitions is that Company A wants to get as much cash as possible from Company B as a single up-front payment and with no tie-ins. Meanwhile B wants to give as little to A as they can get away with, but secure the transaction by applying all sorts of warranties and penalties on A if it goes belly-up. On the face of it, these are two completely opposing strategies, and have hitherto been reality for many acquisitions, often ending in neither party realising best value.

So, what has this got to do with IT systems? Well, firstly let’s consider the situation of company A: All too commonly, owner managers build businesses around themselves; they are the king-pin without which the company does not operate, or exist! Those companies rely on Mr or Mrs A to determine prices, agree contracts, authorise billing and sometimes even raise the invoices as they are the only people who know the prices to bill. They complete the month-end accounts and manage the costs. The owner is so embroiled in the business that they are able to manage it in their sleep. The sad thing is, if one day they didn’t wake up, the business would disintegrate very quickly. Investing in good business systems to manage and run the business is your life insurance whilst you own the business; good business systems replace the king-pin and mean that the business has true value with or without Mr or Mrs A. And once you have made that transition, you can choose to step back from the business a little or sell, realising true worth and minimising any hold the acquirer may have on you.

For the Acquirer, taking over a business where one can extract the owner manager is generally the most desired outcome – it means that company A becomes part of company B overnight, thus imparting values, systems, processes and controls immediately. If the acquired company does not have good business systems in place, and sometimes even if they do, being able to implement your systems quickly, and we’re talking weeks not months, can secure the investment by stamping your mark on that business. Immediately they have your processes, controls and you have full visibility of its performance, stress points, bottlenecks and capacity to negate cost across the expanded business. Good business systems, with a well thought out and proven roll-out plan, can make this happen. All that’s left is to change the sign over the door.

So, whether you are planning to be acquired, or whether you are the acquirer, good business systems will be a significant success factor in achieving true value.