Invoice Factoring As An Alternative Financing Solution

An invoice is a document that has a list of what is owed to you for goods and services rendered. It is a demand for payment from your debtors.

There is usually time between when the invoice is received and when payment is made when the debtor scrutinizes the invoice and reconciles it to the goods or services received. The time taken is the credit period and it is usually agreed upon between the creditor and the debtor before services and products are offered.

The credit period can range from as few as payment on-demand where an invoice is settled immediately it is received, or it can be as long as 90 days. In international payments, the credit period may be even longer due to shipment and other delays in clearance of goods.

Invoice factoring is when a business leverages its invoices against cash to a third party called a factor. The main reason for invoice factoring is to avail immediate cash business to meet its current obligation. The invoice factoring company will then wait until the creditor pays to get its cash back. Invoice factoring is, therefore, a good source of debt finance.

How Invoice Factoring Works

A company delivers goods or services to customers who are reputable and sends them correct invoices. The company receiving the goods acknowledges receipt of the invoices.

Due to the time it will take to receive payment from the debtor, your company sells the invoices to an invoice factoring company otherwise known as the factor.

The invoice factoring company verifies the invoices by contacting the debtor and once the verification is satisfactory, your company receives up to 85% of the invoice amounts immediately. The amount you will receive will depend on your agreement with the invoice factoring company.

The invoice factoring company then receives the payment from the debtor and deducts a fee for the service it offered you. If there is a balance, it is forwarded to your company.

Invoice Factoring as Alternative Financing Solution

As a company, you can use invoice factoring to meet your immediate cash flow needs. The only collateral you need is the invoices from reputable companies and clients. Invoice discounting companies do not require many documents compared to banks.

Invoice factoring is a great way to get short term debt to keep running your business without having to worry about your short term obligations such as salaries and rent. With invoice factoring, you are assured of cash to produce goods and services for other clients.

How can cash flow finance grow your business?

It will be challenging to manage a business, especially a start-up business without cash in your pocket. Therefore, good cash flow is very vital for any business to grow. The reduced cash flow of finance will or may result in the total collapse of the company. When operating a transport business, it will be essential to maintain a reasonable cash finance flow for your business. The below factors shows clearly show that good cash flow can be helpful in the growth of a transport business over a specified period. these factors are:

Maintenance of operations

Cash flow will help a transport business operate its activities in a given financial statement. An excellent cash flow finance will help a business in recording all the operating events in day to day operations of the company. These activities range from either transaction between the customers and the transport business or between the cash movement between the transport business and its suppliers, other businesses, or its employees. This record of the cash flow will help the transport business company maintain its records that can be used for future references.

Helps generate cash flow statement

An excellent cash flow finance will also help the transport business grow because it is used to generate a cash flow statement. This cash flow statement helps the transport business to know whether they are generating profit or losses. This is a bit different from the income statement, which only shows the benefits a company is making without showing whether your business is generating profit. This record of cash flow of finance will help in creating suitable methods of profit-making for the transport business and eventually leading to the growth of the company.

Good decision making

An excellent cash flow finance will also help in maintaining the growth of the transport business in that, it will be necessary for the decision-making processes of the company. A good cash finance flow in a business is expected to show the business’s financial position. It will indicate clearly whether the business is making a profit or losses during a given fiscal period. This will tell the transport business on the amount of cash they need to have on hand for the smooth running of its operations. This will enable the transport business to pay exceptional attention to its cash flow cycles and use those cycle trends to come up with the best measures they can be used to make the best decision that can be used for better growth of the entire business operations.

Why Invoice Discounting is the Best Source of Growth Capital

Growth capital is private equity used when a business wants to expand its facility, buy equipment or enhance sales and marketing strategies. With an extra capital injection, many small businesses move from their stagnation. Sourcing growth capital is not an easy task, especially for small businesses. One of the best methods to source capital for the expansion of small businesses is invoice discounting.

Many businesses offer credit to their customers, especially those buying in large quantities. This causes tying up of funds that businesses could otherwise use for growth. Invoicing these transactions can help you acquire funds for the expansion of your business through cash advances from these invoices.

Benefits of invoice discounting as a source of growth capital

*Alternative to loans

Due to the limits and constraints that loans put for small businesses, it is challenging for them to grow. Invoice discounting has fewer formalities giving a platform for small businesses to source capital.

*Increased cash flow

Since growth capital is tied to working capital, businesses must have an immediate method to improve their cash flow. With the instant providence of cash that discount invoicing offers, it makes it very simple for small businesses to achieve those short term objectives, eventually leading to growth.

*Access to business advice

Information about how business processes are conducted to achieve growth is vital for small businesses. The invoice discounting finance lenders are endowed with the know-how on how to achieve business growth. Despite these institutions providing you with growth capital, they also advise you on how to use it.

*Credit protection

In a case that your customers are unable to pay for your invoice, you are at least insured against it. Many lenders offer debt protection for a period that you select. If your customers are aware of this, they will most of the time comply with the repaying terms.

*Can be done online

The compatibility of invoice discounting to an online system is a significant advantage. With the highly demanding activities of your small business, you may lack time to look for an invoice discounting lender. You should, therefore, use a trusted lender with an online website to enjoy this.

*Grows as the business expand

If you invest the money you get from invoice discounting in expansion, your business will be in a position to offer more credits leading to a growth in your invoice discounting status.

If you want an easy and effective method to get you growth capital for your small business, you should consider invoice discounting. This method acknowledges that every big business starts from somewhere and hence it does not overwhelm you with complex processes and restrictions when you are beginning.

All you need to know about business financing

If you are a small business that is just getting started, it is very important to make sales payments on a regular basis. The reason for this is that the funds available for business are not too large and, if more payments are reserved, this can put you in a bad financial position. In most small businesses, debt management can be a very difficult task, as they usually do not have the financial structure to absorb the debt. There are times when payments are so poorly supported that business approaches bankruptcy. The cash flow from the company occurs at the usual rate because the services provided for the production of goods cannot be stopped. Thus, withdrawal of money and lack of money can lead to serious problems.

In these situations, many companies are looking for business financing from banks to keep them in line. It is usually quite expensive. The reason for this is that now the company must not pay the production team regularly, but also make payments to the bank. Also, the bank has a long process of applying and approving for each loan and the business may not have too much time to obtain finance. If the business rating is not very good, then the loan can be rejected as a whole.

In such cases, there is another viable option that companies can use. This option is called Financial Factoring. Billing companies usually redeem unpaid invoices from these companies at a discounted price and then receive full payment from customers. This greatly helps both businesses and companies. From the point of view of the company, it does not need a sale product, all it has to do is buy an invoice at a cheaper price and collect the whole amount. The difference leads to its profit.

For business, money is available after 24 hours. The profit they make is a little lower than they could get, but at least they get enough money to support the business. In addition, there is no need to make any payments, as this is not a loan, but what it has done is mainly direct sales. The process of acquiring this type of financing is much simpler and is therefore preferable to loans.

In some companies, finance suffers because customers do not pay on time. Doing business on credit can be very risky. If you do not have the money, sooner or later your production will stop. This is where factoring companies come from. These companies buy unpaid invoices from other companies at a discounted price. This is good for business because it may not be able to make a profit, but at least the cost of production will be reimbursed. business financing do not need to spend their money to continue production and do not have to borrow to pay salaries.

Use Capital Released Your Invoice Financing to Improve Your Business

Work ON Your Business not IN Your Business

This is an age old saying that many business owners would have heard but many are guilty of not following.

Sometimes it can be hard to know the difference or sometimes when a business is “your baby” it can be difficult to take a step back and let others do the small things.

 

What is working ON my business?

  • Creating business plans
  • Creating marketing plans
  • Preparation for sale
  • Preparation for generational transition or retirement
  • Working on ways to streamline production
  • Looking at ways to reduce costs
  • Bringing on new clients
  • Negotiating with suppliers
  • Expanding into new regions
  • Employing new staff

 

 

What is working IN my business?

  • Working on the production line
  • Dealing with existing clients
  • Doing time consuming tasks that you could train others to do such as ordering stock
  • Making sales in existing target markets

 

The major difference between these two categories is the fact that the tasks you are doing within your business are tasks that you could train others to do for you. In contrast, the tasks in the “working ON your business” category are much bigger picture and things that only you as the owner of the business can make decisions about.

Employ a Good Manager

The best way to make sure you are working ON your business instead of IN it is to employ good managers.

A good manager will report to you frequently and come to you with issues that they feel are worth your time, but they will not come to you with issues that they can solve themselves.

A good manager is someone you can trust to uphold standards you have set. Obviously, it is also helpful to set targets for managers to meet so that they are accountable to you and motivated to inspire their team. This will free up your time to focus on the bigger picture and therefore grow the business.

This takes capital but should pay dividends. Invoice Factoring can help you release the capital you currently have tied up in debtors, in unpaid sales invoices.

Research and Development Projects funds by Factoring Invoices

Research and Develop New Products and Processes

As small business owners we are frequently told that we are the backbone of the economy, not only, do we create jobs but small businesses are actually innovation hubs. Due to the fact that more often than not small businesses are working in circumstances where every dollar counts, we are often the ones that have the big ideas in terms of streamlining processes. Unfortunately, many small businesses never attempt to develop the ideas they have because it can be very costly to take on the invention of new software or machinery. That said you can use Factoring or Invoice Factoring to release the capital you need for the project.

Government Support Available

You would be surprised at the number of government grants available for small business research and development. In fact, it is completely possible that come to the end of the financial year you will not be out of pocket with the assistance of government grants and refunds and you could be well on the way to revolutionizing your industry.

The fact that you will have to fund the research yourself before the grant money comes through is obviously a valid concern because often there is not too much available money in a business to allocate to such a cause. This is another situation where debtor finance could prove to be useful because it could help to bridge the cash flow gap.

Now that Cashflow is Financed

If you have an idea that you think is worthwhile exploring there is support in the business community for you to do it. Not only could you be enhancing your own business but you could be creating a product or process that many other businesses also have a use for, so consider invoice factoring to release your hidden capital to fund your project.

 

Move Your Business Online Funded by Invoice Factoring

Take your Sales and Marketing On-Line

We live in a world where if you are not online as a business you are missing out on a huge percentage of the population.

However, it is not simply enough to have a website that directs a customer to call or visit you. People want to be able to fill out applications or order and shop for your products or services online. If you have an online presence it must be maintained and actually useful for your customers. If it is not, they will go to competitors who make it easier for them. Keep your website updated, if you change your phone number, make sure your website is updated because otherwise, you are giving away business that could have easily been yours.

It’s All Happening Online

It is also important to market your business online. They say if you aren’t on the first page of a Google search you won’t be found because often people will not look beyond page one. If you don’t show up on page one of Google, do something about it! Search engine optimisation is a huge industry these days so if you do not know how to do something, start learning or employ someone to do it for you.

 

Online marketing can be some of the most specific out there so it is important you understand how to find and target your customer and if this is through Google ads or Facebook ads. Even if you don’t think that your target market is particularly active online you would be surprised at just how many more people you can reach through this method.

 

All this requires capital if it’s going to be done correctly and effectively. Many businesses don’t or can’t do it because they think they lack the capital and therefore they lack the focus.

“ I don’t have sufficient capital so no use thinking about it”

Debtor finance or invoice factoring can change all that, it can change the way you think about your business and the way you plan the growth in your business.

 

 

 

 

 

 

 

 

 

 

 

 

It is also important to market your business online. They say if you aren’t on the first page of a Google search you won’t be found because often people will not look beyond page one. If you don’t show up on page one of Google, do something about it! Search engine optimisation is a huge industry these days so if you do not know how to do something, start learning or employ someone to do it for you.

 

Online marketing can be some of the most specific out there so it is important you understand how to find and target your customer and if this is through Google ads or Facebook ads. Even if you don’t think that your target market is particularly active online you would be surprised at just how many more people you can reach through this method.

 

All this requires capital if it’s going to be done correctly and effectively. Many businesses don’t or can’t do it because they think they lack the capital and therefore they lack the focus.

“ I don’t have sufficient capital so no use thinking about it”

Debtor finance or invoice factoring can change all that, it can change the way you think about your business and the way you plan the growth in your business.

Interstate or International Expansion Funded by Factoring Invoices

Expand Interstate or Overseas

Once you are comfortable and well established in a market, it is time to consider expanding. With the extra working capital that debtor finance can provide, you may be able to do this despite how ambitious it might seem at first.

It is important not to rest on your laurels, your competitors aren’t!

Respond to Your Customers Needs

If you have had interest from customers in different regions and states and were not able to provide your services to them at the time that they needed it, give them a call! For all, you know they could still be interested in your product or service now that you are ready to expand (and they may even know others in that region you can supply).

Keep in mind that if you can’t serve a customer that is also in other locations or regions, the customers business may move all their purchases to a competitor who is able to service their needs in all regions.

However, when you decide to expand an operation it is imperative that you have conducted significant research and put together a comprehensive exporting plan.

Pay Attention to Trends and Changes

You must be prepared to pay as much attention to this new market as you do your existing one. New exporters can easily fall into the trap of not paying enough attention to their export market when their home market is booming, this half-hearted approach will never create any results and in the end, you will be wasting your money.

If you do not have the capital to start exporting to a foreign market by yourself, it could be beneficial to look into piggyback distribution. This is a situation where you form a partnership with a company who is already established in the market you wish to enter and use their distribution channels to enter the markets. For example, if you make printers you would partner with a company that sells computers in your desired market.

Overall, it is important to diversify and expand your market in order to mitigate risk.

Invoice Finance and Factoring to Fund Expansion

Expand in Different Products Services and Regions

In any business it is difficult to stay relevant if all you offer is one product. However ground breaking the product might be when you first enter the market; there will soon be copycats and competitors that show themselves and if you are not keeping current you will lose out to these new entrants.

A tactic to stay relevant may be to offer complementary services or products. If you offer everything that your customer needs why would they go anywhere else?

As an Example

For example, if you own a computer shop, you could safely assume that your customers will also want to buy printers, external hard drives and keyboards. You could also assume that they will want somewhere to service or fix their computer when something goes wrong. Perhaps you could offer customers specialist training on high level software or offer older customers lessons on the basics of using a computer.

Telephone systems are becoming more and more hi tech and may have a synergy. Photocopiers and other office technology may also have relevance depending on your target market and location.  The point is that you offer everything your customer needs and the more you offer the more convenient you become. If you are considered a convenient option for your customer, then you can charge a premium for this and a customer will happily pay it.

Be Current and Efficient

You should always be looking for a point of difference from your competitors and by continually creating new products you are sure to do this.

Contact Nova Cash Flow Finance to learn more.

Debtor Finance or Factoring can Finance Your Plant and Machinery

Purchase Equipment or Machinery to Streamline Your Workflow

Purchasing new equipment and/or software for a workplace can sometimes be a huge lump sum cost for a business and a drain on working capital. Nevertheless, it is important to realise that by having the most up to date software and machinery you are reducing cost and saving time. You are also remaining current and up to date.

Common Mistakes

A common mistake that a lot of business make is holding on to an older piece of equipment that is constantly breaking down. Not only are you paying money repeatedly to repair this old equipment or have new parts shipped in, but you are causing delays in the production line or the distribution chain which may result in a loss of customers who are sick tired of experiencing the same delays. They will go to a competitor that does have the latest, the best and the most reliable.

In addition, you are also likely to be increasing labour cost due to down time when plant and equipment is out of action. Sometimes the task may need to be completed manually or in some inefficient and costly way.

Update your plant and equipment

It is also beneficial to simply update outdated software because clients value suppliers that use the latest technology. For example, think about how inconvenient it is when you come across a cash-only establishment in this day and age.

Across the board, it is in your best interest to keep software and machinery up to date, it will save you money in the long run by streamlining processes and keeping customers happy