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 Cash Flow Finance can help your Real Estate Business

To comprehend cash flow in real estate, you need to understand essential property financials. You must be able to discern and predict income and expenses in the real estate business. Cash flow is the financial gain you amass after accumulating gross income, financing all costs, and putting aside money for repairs in the future. It is a good source of passive income for real estate investors.

An intelligent real estate investor will have more income than expenses each month. When you put the right strategies in place, for instance, proper property management, cash flow for real estate business becomes a reliable source of passive income. Passive income is the money you make weekly, monthly, quarterly or annually that does not demand active working like when you are employed or running a small business.

Cash flow helps in financing your real estate business in the following ways:

1. Cash flow generates more possibilities

When you reinvest your profits into another real estate venture, you dramatically increase your profits and improve your financial welfare.

2. It produces security

Having additional income coming in regularly creates safety by enlarging your cash reserve so that in the case of unforeseen circumstances, for instance, unforeseen repairs, unexpected delays in rent payment, etc. you will be able to pay for them comfortably.

3. It allows you to invest in a prime location

Good cash flow from your real estate ventures will give you the ability to invest in properties located in prime areas that attract high-end tenants and bring handsome returns. Investing in prime locations gives you the power to select your tenants and to sustain pricy rental income for substantial profits. Also, a prime location has a lower likelihood of vacancy and therefore reduces the risk of insolvency.

4. Helps in Accumulating Long-Term Appreciation.

A property located in a prime location with good cash flow will increase in value with time. This is advantageous to the real estate investor who can sell it for a high price and reap a good profit from it.

5. It enfranchises the investor

When you set up your cash flow such that you can pay for all your living expenses, it means that you no longer have to labor for a livelihood. This allows you to focus on the things that you love doing, for example, your hobbies, traveling, and other passion projects. It will enable you to focus on maybe raising your family and spending time with friends and loved ones. You can visit any place you want with your extra income, and you can buy anything you want and even further your education.

HOW CAN CASH FLOW FINANCE HELP TO DEVELOP YOUR BUSINESS?

In business, there are seasonal peaks and troughs; hence during this period, cash flow finance avails injection of cash for managing budgets in the business. A business cash flow is the total of money that flows out and in of the company within a given period. If your business is growing rampantly and you are increasing profit each year, then you are heading in the right direction. However, building profitable companies can be hit by cash flow challenges if their finance maneuver or investing activities are not efficient. For example, if your business debts are due before you haven’t collected your money from your sales, there will be cash flow crashes; therefore, your bills won’t be paid in time, which leads to stricter problems like facing questions of creditworthiness. But you don’t need to worry since cash flow finance is there for you. In this article, I will discuss what cash flow finance is and how it helps in the development of your business.

CASH FLOW FINANCE.

Cash flow finance is a kind of a short term loan. This kind of fund is not a solution to managing long term cash flow challenges, but they are very significant when you need quick finance during lean times in your business. Cash flow finance for transport business is flexible, manageable, and one can access quickly .when you secure the loan, you repay the loan with interest within a short period. The period of paying the funding is always approximate 1-6 months. While borrowing these funds, it’s important to check terms and conditions as payment schedules differ from one lender to the other.

SIGNIFICANCE OF CASH FLOW FINANCE IN A BUSINESS.

1 Cash Flow finance is an option loan when your company has a short supply of money. It often happens in small businesses as they build a customer base, and when they are growing.it may even occur in companies where sales are seasonal and have specific natural peaks.

2. Cash flow finance is an option when you need an injection of emergency cash or a case you need Temporal unplanned funding to make a quick investment on pieces of equipment and other genuine business needs.

3. Cash flow finance helps a business plan ahead and prepare a budget, thus hindering businesses from facing shortfalls.

4. Cash flow finance is obtained fast when you provide information to a potential lender; you’re an established business, thus saving your business from falling or collapsing during hard business times on time.

In summary, if you want to improve cash flow in your business, then cash flow finance will be the best option.

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.

Invoicing Made Easy

Often, in the day-to-day business of a business dealing with the number of daily transactions, it is necessary to have a remote invoice immediately and, therefore, inaccessible at the time, which poses productivity problems. and concerns that may directly or indirectly affect the overall performance of a company. To overcome this problem, the concept of electronic invoicing is catching up. Electronic invoicing simply refers to importing a virtual invoice saved in PDF format or any other compatible document directly into the billing software, so that it can be presented as a useful reference when necessary.

The main advantage of this type of system is the ease of access and convenience it offers by offering its customers a wide range of payment types. Thanks to electronic invoicing, customers who are quite rare at the moment do not only have the mail at their convenience but they can also monitor their banking activity digitally. By using dedicated billing software, you can also automatically configure the system to send reminders to customers about the due date or any update/reminder, so that customers get the most out of it. Benefits helping them avoid late payments.

With the use of invoicing software and the electronic invoicing , there is no longer response time for sending invoices to the courier for delivery, pending payments by mail or queued at the bank. You can send electronic invoices securely to your customer’s email identification with one click or electronically transfer the payment to your account. E-invoicing allows you to process multiple invoices in a fraction of the time required to complete an invoice, which, in addition to saving you time, means that your donation to nature, which is green, reduces costs. We are roofing experts. Whether you’re replacing an old roof or building a new one, fixing fireplaces, we’ve got a wider range of skills to meet your daily roofing and chimney needs. Repairs to make sure your roof and, therefore, always be safe.

One of the strengths of e-invoicing is that shipping costs are reduced to zero, significantly increasing activity. 

Online invoicing is one of the many methods of cash flow finance for business you can use to reduce costs and make your business more efficient and effective. In the current market, autonomous companies and small businesses are taking advantage of the benefits of online billing. They discovered that bills sent online are paid faster and look more professional. This help to Avoid Overdue Accounts.

Invoice Finance: A Quick Guide For Small Businesses

There are many ways to manage a company’s cash flow and, of course, it’s essential to master it if you want to stay afloat, but all the tips to keep the cash flowing become redundant if you are already struggling. Here is a quick guide to how invoice finance can help you with your cash flow struggles.

When your small business is experiencing a liquidity crisis, you will probably find it hard to find a lifebuoy and many offers will be offered because liquidity solutions are the burden of many financial companies.

One of the most discussed topics will be billing funding, a safe and healthy term covering several financing options. You can also listen to it in the form of cash flow financing, accounts receivable financing, debtor financing or sales financing, but what is it?

In simple terms, Invoice Finance is a means by which a company can use its debtor portfolio as collateral and, in general, release up to 85% of the cash associated with waiting for the money owed to the company for outstanding debts. Many industries rely on this type of commercial financings, such as agencies providing temporary staff, because their usual practices involve unusual cash flow situations, as they will have to pay a large number of people a week or a day, but expect to pay staff supply bills for about a month.

The term Invoice Financing actually covers three main types of financial solutions and while they all have the same objective of releasing a company’s cash and all use unpaid invoices as collateral, they all operate in a subtle way but fundamentally different.

Factoring:
With factoring, a financial company intervenes and assumes the administration of the sales book and the credit control of a company. In essence, invoices are “bought” at a high percentage of their value to release money from the company and the factoring company then sues the debtors in the usual way. Many small businesses prefer this because they often do not have the facilities to manage their own credit checks.

Invoice Discounting: In addition to the fact that it releases a similar amount into the business with unpaid invoices used as collateral, but that is usually a confidential service without customers knowing that the financing is being used. Unlike factoring, a company will maintain its credit control management. Large companies with credit control services or companies that do not feel comfortable with customers know that their financial arrangements often opt for discounted invoices instead of factoring.

Asset-Based Lending:
When, as with the other two previous loan options, cash is released into overdue accounts, asset-based loans release money into all potential assets of a business. In general, this can include goods, equipment, machinery, inventory and even the brand of the company if they have enough value, as well as the usual bills. Clearly, this is a way to raise much larger sums and is more often used when a single event has triggered a cash flow crisis or to finance an expensive undertaking, such as a merger or acquisition.

Simple Tips For Choosing The Right Debtor Financing Company

Debt is a serious problem in many countries. Many families face the temptation to settle accounts in the middle of the debt of several creditors. One of the best solutions to solve debt problems is to carry out debt consolidation. This procedure can be handled in different ways. To find the best solution for consolidation, it is recommended that the debtor consult a debtor financing company. However, the debtor must be very careful when choosing the right Debtor Financing Company. The following seven guidelines must be followed to ensure that a person is dealing with an accredited organisation:

Compare companies:
The individual does not have to work with the first company he finds. It is always best to consult at least three organisations and compare products, services and prices.

Check the sincerity:
A truly professional organisation will want to do more than consolidate its debt for the consumer. A good company will want to educate the consumer on how to prevent future debt problems and financial failures.

Conduct the investigation:
You should always conduct an investigation before dealing with a debt consolidation company. It is a good idea to read the information on the company’s website and consult others who have worked with the same company. An agreement or program should never be concluded without thoroughly investigating the organisation.

Talk with the representatives:
One of the best ways to find information about a debt consolidation company is to call this company. The debtor must ask questions about the services offered by the company. Representatives must always present a kind and helpful person. Evasive responses may indicate that the company is not reliable.

The Fair Trade Office:
The consumer must visit the website of the Fair Trade Office. Here you will find useful information and assistance on how to find a legitimate consolidation company.

Consider the monthly expenses:
Whichever company the consumer chooses to work with, the monthly rates will be involved. A good tactic is for the consumer to enter their monthly expenses to see how much additional money they can allocate to a consolidation company. This way, he or she can work with the budget.

Stay in the loop:
The best debt consolidation will remain in close contact with the debtor and inform him about his procedures. The representative should never leave the debtor in the dark. The consumer must ensure that their representative is available at all times for questions and concerns.

Following these seven tips, a debtor should be able to find the best debt consolidation company for him. Debt problems will disappear more quickly if the customer chooses the right equipment.

Everything you need to know about Invoice Finance

There are a few benefits that can be picked up when a company chooses to invoice finance. A business that deals in the sale of products or services to different businesses will receive the advantage of enhanced cash flow by utilizing an invoice finance service.

What Does Invoice Finance Means?

Essentially, to invoice finance means to sell or assign your outstanding invoices to an cash flow finance company. This company, as a rule, will give you instant access to a percentage of the total amount of the unpaid invoices assigned to them, normally from 70-90% of the value of approved invoices. By and large, they may likewise assume liability for invoicing, chasing and collecting owed invoices and additionally acknowledge a percentage of the loss on unpaid invoices.

Benefits of Invoice Finance 

Cash Flow Increase

Approaching these funds significantly increment the cash flow inside your company. Cash on hand for expanded production, savings by a method for discounts on company expenses, decrease or even elimination of costs of doing business, and enhanced open doors for business loans.

More Sales 

By utilizing an invoice finance service there are no waiting 30-45 days for individuals who pay on time and much longer for late payments on invoices. That cash on hand can be more promptly available for production, creating an immediate availability for more sales.

The advantage of Discounted Payments 

Another zone the correct business can increase more prominent cash flow from utilizing invoice finance is in taking advantage of discounted payments of operational expense. Many companies offer discounts of as much as 10% if their invoices are paid on receipt or inside a specific time frame.

Better Terms From Suppliers 

With invoice finance, you have cash on hand to pay your bills sooner, as opposed to holding up until the point that your customer pays you for your item or service. Expanded cash flow likewise builds your companies buy power, improving it conceivable to negotiate terms or discounts from providers. The savings in these two areas alone will, by and large, outweigh the charge from the invoice finance service.

Different Benefits

There is a different operational expense that can be reduced or even eliminated when utilizing invoice finance, for instance, administration costs, stationery, and office hardware. While including the cost of employing an accounting clerk, their salary as well as company benefits, it’s anything but difficult to see some extraordinary advantages to utilizing an invoice finance service.

Invoice finance can be especially helpful to a business in the start-up phase. Most lending institutions have strict rules on lending to ‘new businesses’. A bank or moneylender will just think about a small bit of outstanding (unpaid) invoices owed, frequently just 40% of the total amount of outstanding invoices, while administering a business advance. By invoice financing, your record indicates cash on hand instead of a large amount tied up in outstanding invoices.

Disadvantages of Invoice Finance

There are a few disadvantages to utilizing an invoice finance service. The products or service your company supplies can hugely affect whether your company should utilize invoice finance. Businesses giving recurring services or item arranges are great candidates, while invoices for one-time requests may think that its difficult to acquire this sort of funding.

These companies want to know the debtor and their reputation in paying obligations previously tolerating invoices owed by that debtor. Another disadvantage would be if the markup sale cost of the products or service provided was not exactly the amount of the invoice finance charge.

For the correct business consolidating the enhanced cash flow with a sensible net revenue alongside expanded sales arranges the business is in a situation to expand and the expense to invoice finance can without much of a stretch be caught up in expanded profitability.

Invoice Finance for Small Businesses

Invoice financing, which is also referred to as accounts receivable financing lets business owners finance any outstanding invoices in their business. Companies that deal with invoice financing simply advance you cash and hold outstanding invoices, rather unpaid invoices as collateral. This, in turn, gives you the perfect opportunity to invest back into your business. In invoice financing, you have the opportunity to get an advance of up to 85% of your invoices value and then get the remaining 15% later on depending on the agreement between you and the invoice financing party.

However, there are other financing companies that can give you an advance of up to 100% the value of your unpaid invoices. Most repayments of the advance are set for when the customer or client clears their invoice payment. The most outstanding fact about invoice financing is that you can get the advance you request within a very short period of time. Most of the providers have you sorted within 24 hours.

Advantages of invoice financing for small businesses:

  • You don’t need to wait until the invoice payment is done to obtain cash.
  • Customer invoices are all you need as collateral.
  • The advances your business gets highly rely on the invoiced business credit.

Disadvantages associated with invoice financing:

  • The interest paid; or rather the service fee can be much higher as compared to traditional or typical financing.
  • The fee charged also depends on the period of time before the invoice payment is done.

Who is eligible for invoice financing?

This is pretty simple. As long as a business is based on a business-to-business model and it does currently have pending receivables, you are eligible to apply for invoice financing.

Basically, the deal is;

  1. These financing providers are not keen on your time, profitability or revenue in your business.
  2. As a matter of fact, it is the invoices you provide that act as collateral of the loan requested. As long as all the invoices check out and make sense, the financing companies really don’t get into the details of your business.
  3. Generally, the maximum amount of loan that your business can qualify for is based on the total value of the invoices you provide. It is important that you also remember that your creditworthiness is also one of the key factors that determine the amount of money you can be loaned by the financing company.
  4. You also need to remember that there are some other invoice financing companies that also go through your credit report before giving you the advance.

As discussed above, invoice financing is a kind of loan from the lenders. From a technical point of view, this can be bolded as the main difference between invoice financing and invoice factoring. In this technique of funding small businesses, the business owner doesn’t receive an advance but actually sells outstanding invoices to a factoring company at a discount. In return, the company gives you the cash right away. Later on, the company comes and collects the cash from your clients or customers. The window before the factoring company collects the cash from your customers depends on the agreement set. However, typically this period ranges from 30 to 90 days.

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.