Many small-business owners will be keeping an eye on their ongoing cash flow. After all, cash flow is among the most important predicators of success and is a crucial aspect of business financing.
Fortunately for companies that are concerned about their cash flow, there are a range of different business funding tools on offer to assist them in reaching a stronger financial position. One of these is invoice factoring – an innovative financial product that can help organisations to manage their cash flow.
Invoice finance works by assigning invoices to another business – essentially an outsourced credit department – that then assumes responsibility for filling the invoice and handling the payment. The invoicee receives an up-front payment for the invoice, without having to invest resources into chasing up the debtor, a responsibility that is assumed by the invoice finance provider.
This upfront payment will represent the majority of the invoice’s value, with the remaining amount transferred once the matter is settled with the debtor. The exact distribution will depend on a number of different factors, although it is possible for companies to receive up to 80 per cent of the invoice upfront.
What are the benefits of invoice factoring?
While most businesses in Australia will pay their bills within the appointed time frame, it often only takes a few late payments for the recipient company’s finances to suffer. Invoice finance allows applicant companies to offset the risks that come with late payments. This makes invoice factoring a crucial part of any strategy to reduce the risk your company faces.
Among the other benefits on offer from invoice finance are:
● Improved cash flow. Prompt payment through invoice financing can put your business in a much stronger financial position.
● More resources to invest in your business. Once you remove the administrative burden of chasing payments, companies can put those resources into expanding their operations.
● Financing to scale with your business. Alternative financing methods like a business overdraft often won’t change over time, making them unreliable for rapidly growing organisations. On the other hand, invoice finance will adapt to match the growth in your sales.
● Support based on your business position. Similar to the above point, many traditional financing options will depend on your personal financial position as a business owner. Invoice factoring is solely linked to company finances, rather than your personal assets.
● Fast approvals. Invoice financing agreements can usually be reached faster than alternative financing methods like a bank loan. This means you will often have the initial portion of the invoice in your account within 24 hours.
● Easier to take on new business. When companies know they aren’t at risk of late or missing payments, it becomes much easier to accept new business contracts.
What industries can take advantage of invoice factoring?
Any industry where companies are forced to wait while invoices might be completed by a client could benefit from pursuing an invoice factoring solution. Some of the most common include:
● The construction sector and trades
● Transport and distribution
● Professional services like recruitment
● Cleaning, maintenance and landscaping companies
These are just a few of the sectors that might be able to use invoice factoring. The flexibility of this service means it can be applied to a wide range of different sectors, depending on the specific payment conditions.
There are also other factors that might make a business want to pursue financial factoring. Seasonal industries or those with temporary workloads may be better suited to the opportunity offered by invoice factoring.
Why is CashFlow Finance the right choice for your invoice factoring?
At CashFlow Finance, we pride ourselves on offering a range of debtor finance and invoice factoring solutions that can assist businesses to improve their financial position.
CashFlow Finance are a small, rapidly growing business that understands the challenges that come with being a small company trying to lay the foundations for future growth. Our focus on the financing issues affecting small-businesses means we are ideally suited to assist your company to achieve its potential.
We can also offer you competitive terms that set our service apart from other providers. CashFlow Finance won’t impose minimum terms or exit fees on our invoice factoring facilities, nor do we require a wide range of potential clients. Your application will instead be considered against the creditworthiness of your debtors.