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.

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 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.

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.

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

 

Use Debtor Finance to Fund an increase in Sales or Production Staff

Employ More Sales Staff or More Production Staff

Often when small businesses start gaining momentum with marketing, log jams can be created in their sales funnel. This means that you are unable to keep up with the number of new inquiries you are attracting. If you don’t respond to an enquiry you will lose the opportunity, there are plenty of competitors out there ready to eat your lunch! Often, if you are attempting to do everything yourself as an owner-operator you can find yourself wasting time with dead-end leads and missing out on potential clients because you have taken too long to get back to them.

As a business person it is important to recognise that you cannot do everything yourself and even if you cannot afford to employ someone on a full-time basis it may be beneficial to look into outsourcing sales tasks. Outsourcing offers a plethora of benefits such as scalability, reduced costs, and trained staff.

Either way, having more working capital will allow you to take up one of these alternatives which should result in business growth.

Employ a BDM

Many businesses also find it helpful to employ the services of a BDM (business development manager). The person in this role will take care of sales by maintaining and growing existing clients as well as following up on interested parties, in addition to making cold calls and chasing new business. You will be updated on their progress, but you are able to use your time to focus on the bigger picture.

You can also add manpower and staffing to your production or distribution department, so you give better service to your customer.

Use Invoice Factoring to Boost Your Sales and Marketing Budget

Use Factoring to Boost Your Business

It can be hard for business owners to justify a large marketing budget. Now more than ever, there seem to be more and more free options available to reach new customers.  Whilst free or very cheap, options like email and social media both have their place in the marketing game. It often takes the skills of a professional to actually make these channels reach the right demographic and keep them maintained to a high standard. This costs money and this is where you can use Invoice Factoring to boost your business.

Sometimes, as a business owner, we have to admit to ourselves that we don’t have the time or the skills to do our own marketing. In this case, it is worth increasing your marketing budget to employ the skills of a professional. You reap a return on your investment with the new customers you will attract. At the same time, you will also be giving your existing and your new customers the attention and service they expect. This is because you are focusing on the customer and not putting all your energy into marketing.

Invoice factoring releases capital and allows you to concentrate on your core skills.

Choose Your Target Media

One of the most under-utilised options when it comes to advertising in industry publications. This is the perfect way to reach your target market, there is no question it is reaching the right people because the only people engaging with an industry publication are those already in the industry, those looking to get into the industry and at worst those who are close to the industry.

Advertising in a trucking magazine seems much less glamorous than creating a colourful Instagram campaign, but, in reality, if you are looking for truckers you may as well spend your money somewhere that you know they will be listening.

It is also important to note that we live in a world where potential customers are being constantly flooded with emails. Consider this when you are creating an email campaign, how will your email stand out? Visual stimulation is a great way to stand out because the human brain will process images faster than words. It could be in your best interest to employ a creative type to take charge of this process for you and don’t forget you can reuse visuals and logos once they have been created, so think of it as an investment.

Target and be Focused

Precise and efficient marketing will attract the type of customer you want and sometimes you have to be willing to spend money to get to this demographic.