An alternative way of overcoming late payment
24/01/2017 / Comments 0
When cash flow is suffering at the hands of late payment, most businesses rightly focus their efforts on improving their credit management to reduce the length of time between providing a service and getting paid for it. But could there be another option?
While improved credit control can provide many benefits to businesses experiencing late payment, securing targeted and specialist finance can also be beneficial to help bridge the cash flow gap that arises from trading on credit.
The delays associated with trading on credit terms mean that businesses often find their working capital stretched to the limit with suppliers, bills and wages to pay before customers settle their invoices.
But, instead of waiting weeks for customer payment, funding solutions such as invoice finance allow businesses to quickly access the capital tied up in its sales ledger.
Invoice finance releases up to 90% of an invoice’s value within 24 hours, allowing businesses to free up the cash that’s essential to fulfilling new orders, meeting day-to-day commitments and securing early settlement discounts with suppliers. And when the customer pays, the remaining balance of the invoice is made available minus a service fee.
According to the Asset Based Finance Association (ABFA), the third quarter of 2016 was the biggest ever for asset based finance, with a record £20.7bn advanced to businesses – up by 4% year-on-year.
How can invoice finance benefit your business?
- Access up to 90% of your sales ledger value within 24 hours of the invoice being issued
- The amount you can access grows with your business
- It can help your business to negotiate supplier discounts
- Option to incorporate credit control to reduce in-house overheads and improve performance
- Can include credit protection to safeguard against debtor insolvency or protracted default
- Unlike an overdraft, invoice finance solutions cannot be recalled on demand
The two main forms of invoice finance are factoring and invoice discounting. Whilst factoring can additionally provide credit management support, invoice discounting lets you retain control of your sales ledger, solely providing the working capital that would otherwise be tied up as an asset on the balance sheet. Either solution will ultimately allow you to focus on growing your business.
If you would like to find out more about how invoice finance can benefit your business, click here to download our ultimate guide.
As an independent commercial finance broker, we could help your business secure the most suitable funding solution for your needs. For more information about how we could help please contact our team on 0800 9774833 or email firstname.lastname@example.org.