Success in business is often determined by: The careful management of cash. Maintaining healthy cash flow is a challenge faced by growing businesses in every industry that trade with clients on credit terms. One of the key factors that determine whether a business can keep growing and fulfilling orders is ensuring that there is sufficient cash flow to maintain operations.
Invoice finance bridges the gap between the point at which you make a sale and the time payment is received from the debtor, which is usually 30 to 60+ days.
In this article we share with you the different advantages of invoice financing and how it can change the way you manage your cash flow.
1. Get Immediate Access To Cash Without Needing A Loan
While traditional loans are debt that usually has to be carried on the balance sheet and serviced with monthly interest charges, invoice financing works differently as it speeds up a business’s access to the money that it’s owed from its debtors. This type of finance does not require long term committed contracts.
2. Only Make Repayments When The Money Comes In
Invoice finance isn’t paid back until the original invoices are settled by your clients. There are no interest payments, in fact nothing needs to be repaid at all to the funder, as the funder only collects their money from your debtors when the debtors pays their invoices. Businesses who use these services don’t have to make fixed-term repayments. That’s great for cash flow!
3. Feel Better About Big Projects
Businesses carry a lot of cost for big jobs and payment is often slow when there’s a big corporate involved as the debtor. That’s a bad combo. Invoice financing allows businesses to take on larger and more lucrative contracts without getting stretched too thin as they are able to get immediate access to the cash from the invoice they issue to the big corporate on completion of the job, instead of waiting the normal 30 to 60+ days for payment.
4. Business Growth
In order to grow, businesses need a steady cash flow. There are various reasons why factoring is good for business growth. To start with, it enables a business owner to focus on acquiring new customers rather than chasing debtors. Secondly, it allows a business to extend credit lines to its loyal customers who require credit facilities. Thirdly, it makes it possible for a business to pay its suppliers, and consequently avoid supply chain constraints. Fourthly, a business owner can focus on marketing his/her business rather than fending off creditors. These aspects can help you grow your business while competitors who are facing funding problems flounder.
5. Choose How Much Money You Need, And How Often
Businesses can choose how much cash they want to access when using invoice financing companies. They can stay in complete control and only access those funds that they require when they need it. Also, because invoice financing is typically paid back in a month or two (when the debtors pay), not a year/s later, companies can access the funds again and again, like a revolving line of credit.
6. You Can Apply For Invoice Finance In Hours
Business owners don’t need to leave their office, store or workshop to apply for invoice finance. They can connect to providers online, flag the unpaid invoices that they’d like to finance, and apply on the spot. There is minimal paperwork required (all online or via email) and money can be in the business account within 24 hours of receiving the information required. For those business owners that are not tech savvy, simple extraction of csv or pdf files sent via email will also do the trick.
7. Reduce the Risk of Late Payments and Bad Debts
Late payments from customers and bad debts can cripple a business. Of course, you can take legal action against debtors who fail to pay their debts on time or are unwilling to pay, but this approach can be costly and lengthy because you have to hire and retain a lawyer to represent your company. To avoid such a scenario, invoice discounting helps to eliminate this risk. The invoice finance company does their credit check on you debtor, independently and often take out insurance against non-payment. Such companies have professionals who know how to deal with customers who are likely to make their payments late or fail to pay completely and how to recover the funds.
Essentially invoice financing allows a business to get paid immediately for the products provided and invoiced so that the cash can be put back in the business to purchase more inputs to sell more product quicker, hence increasing turnover and profits.
Invoice financing provides immediate cash flow by releasing the cash tied up in sales invoices. Clients can get up to 90% on the face value of their invoices, within 24 hours of approval so there is no need to wait up to 90 days to get paid by your debtors.
“Get tomorrows cash flow today.”