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.

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.

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.

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.

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

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.

Increase sales and marketing budget

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 Invoice Factoring can help.

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.

Negotiate prompt payment discounts from suppliers with Factoring Finance

Factoring finance is a tool that you can use in many ways. All businesses love customers and clients that pay quickly. They do not have to chase for payment. In fact, suppliers love prompt payers so much that they are often willing to offer discounts to those who do it consistently. You can be one of those customers by using Factoring finance.

Understandably, though many businesses are simply not in a position to pay within (say) 7 or 10 days on a regular basis. If debtor finance or factoring finance is effectively used you could be in a position to do this. As a result, you might be able to negotiate as a discount. You could reduce costs and allocate more funds and resources to grow your business.

Become a Preferred Customer

In addition to giving you discounts, suppliers will often give prompt payers access to other benefits. These can include benefits such as first access to new products and general preferential treatment.  That may include your orders being pushed through first. Your suppliers LOVE prompt payers. Factoring finance can put your business in that position.

Many small businesses can find it intimidating to negotiate with a supplier. It is important to remember that you will not reap any of the benefits of a good relationship without actually starting a conversation with your supplier.

You Should Negotiate

Negotiation is not everyone’s strong point, but it is crucial for business owners to know that they are the ones with the ultimate power in these situations. If they have the cash that is. It is up to you whether you buy products off of them, not the other way around.

Another tactic that many businesses employ, is utilising multiple suppliers. This ensures that you are keeping everyone honest and on their toes. When you have more than one supplier they are aware that they are in direct competition with each other.

Prompt payment discounts can be arranged with suppliers and it is possible to be a prompt payer by utilising debtor finance.

Learn to negotiate and do not be afraid to walk away from a supplier if they are not offering you the best price.

To find out more about factoring finance click here.