Invoice finance is one of the best ways to improve your company’s cash flow. In the current economic climate, it can take months for clients to pay you what they owe, which can leave your company’s cash flow strained.
Without available cash, it can be difficult for a business to operate, if you have products and supplies that need to be paid for as well as expenses such as wages. Invoice finance allows you to maintain a healthy cashflow even if your customers pay late.
Invoices are one of the most flexible assets your business has yet they are often overlooked. Thanks to invoice finance, you receive a substantial proportion of the owed monies (approximately 95% of the invoice value) and the rest once the remaining balance when your customer settles their invoice.
You pay the provider a small fee for this service and your business retains most of the invoice value.
Invoice finance is generally broken down into discounting and factoring. Invoice factoring is a hands-on service offered by a provider. You receive up to 95% of the value of the invoice within around 24 hours. Your credit control is also looked after by the lender. You can also include from bad debt protection which is offered by the majority of companies.
Medium and large businesses tend to use invoice discounting in order to gain immediate funds. It is a quicker and more convenient way of increasing cash flow than a business overdraft for example.
You should consider invoice finance if your clients are continually late with payments. This method of improving cash flow is especially useful for new companies as they require ready cash in the first difficult weeks and months of being in business. The majority of businesses allow up to 30 days for repayment and most clients take full advantage of this window.
If you don’t have cash, your business can’t expand. Invoice finance can protect you from such a problem by ensuring that your company is never short of cash at any time during the month. It is a finance method that can relieve a lot of stress and the only caveat is that you have to pay the invoice finance provider a certain fee.
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