According to the Federation of Small Business (FSB) latest survey, one in ten small businesses are adversely impacted by late payments. When your business's success relies heavily on customer guaranteed money to support monthly outgoings, late payments can be the difference between a successful business or a business going under.
What can you do to stop late payments from preventing your businesses’ growth?
- Ensure you follow the clear government-supported guidelines provided for invoicing and collecting payments.
- Build a late payment system into your cash flow forecast to help protect yourself from payment impact, which will in turn demonstrates late payment readiness to lenders.
- Consider Invoice Finance to help recoup the cost of lost invoices and manage your cash flow.
Invoice Finance offers a chance for businesses who are struggling to balance their books against late payments to right themselves and get back to business as usual. Access the Business Finance Finder’s (Finpoint) Invoice Finance lenders and you can receive up to 95% of the value of your invoices in a matter of days.
Invoice financing can be used preemptively as a cash advance credit line - without the need to provide collateral or a personal guarantee. Reduce the stress of late payments and chasing invoices by having cash in hand to deal with potential cash flow problems. Invoice Finance can be used to provide growth opportunities; you can use your extra funds to expand your business, buy assets, and better your supplier relationships with faster payments. It should be noted that Invoice Finance is not and should not be used as a replacement for businesses revenue. In order to successfully utilize invoice finance you need to continue to have a steady stream of sales. Invoice Financing is not a loan to plug the gap during a slow period, be sure to keep this in mind before applying for this type of funding.
What kind of invoice financing will suit your needs?
Invoice discounting allows you to retain control of your invoices and ledger. The funder advances cash for unpaid invoices but the debt collection is conducted by you, as a business. Lenders may advance 70% - 85% of the invoice value and release the remaining amount, deducting a small fee once they are paid by your clients.
Invoice factoring requires you to ‘sell’ the whole of your debtor book for a predefined time period (typically between 12 or 24 months). Lenders might advance as much as 95% of the invoice value. This option also offers more anonymity than Invoice Financing as the debt collection is conducted by another party.
Selective Invoice Finance
Selective Invoice Financing is the more flexible option out of the three as there is typically no contract tie-in and you can decide which invoices you want to fund. This is a great option for businesses with a one-off requirement to remedy cashflow problems or those who don’t want to fund their full sales ledger. Fees are only applied to the invoices you choose to fund which can make this the most cost-effective option.
Ready to explore your business finance options?
Whether you’re looking to grow your business, make investments or support your cash flow, we are here to help. As a business you can use the service for free and save time with one simple online application, and let our experts handle the rest.
Blog written by the Finpoint team