Understanding cash flow financing terms
Cash Flow Terms
In our Cash Flow terms section, we will explore them all in more detail and offer advice as well as lots of useful resources along the way.
Invoicing is essential for small businesses. They are the business documents that enable companies to be paid for their services. A popular way to get started with invoices are to use invoice templates.
It's important to understand all the key financial terms when running a business. To help, we’ve put together the most common terms in you're likely to come across as an SME and how to understand them for future use
Business Cash Flow Loans
Put simply, a business loan is where a sum of money is lent to a company over a period of time, and the monthly payments and interest rate are fixed over the agreed term. Business loans help your cashflow position and can be extremely helpful for a business by offering a short term finance option.
Our digital onboarding process has revolutionised cash flow financing in the UK
Why would a business need a cash flow loan?
Cash flow is one of the biggest financial challenges that any small business will face. Without readily available cash, it can be really hard to push on and grow the enterprise, and in severe cases, it can even threaten the viability of the business. This happens when cash flow is so poor that there are few funds available for things like payroll, rent, and other essential monthly commitments. But what some of are the biggest problems with cash flow for small businesses?
It’s worse for some industries than others, but any business owner or accounts officer will know just how expensive it can be to keep a modern firm going. It’s these (often monthly) expenses that are what really eats into cash. Any business that’s finding that too much cash is leaving the accounts every month might look to making some cuts, or looking for alternative and cheaper suppliers. Never do anything that might impact profit however, as this could ultimately make matters worse.
Unpaid invoices are perhaps the biggest contributor to problems with cash flow, and they can affect businesses of any size. At any time here in the UK, hundreds of millions of pounds are outstanding, and this can be really harmful. Fortunately, if your biggest issue is late invoices, there are plenty of ways you can improve the situation. Tightening up on credit control, effectively tracking and chasing invoices, and being careful with terms can all help to get those invoices paid when they’re due. There are also financial products on the market, such as invoice finance, which can help remove some of the worry over late payments.
A lack of profit will naturally mean less cash coming into the business. Start-ups can often face challenges in this regard, because their unestablished reputation can make it harder to secure lower rates for goods and services that they might then sell on. This is why it’s so important for new market entrants to be able to offer something different to competitors. If you can ensure your product stands out - whatever it may be - then you stand a better chance of being able to apply a strong profit margin that doesn’t have to directly compete with other businesses.
Finally, a lack of planning can actually be much worse than you might expect. The dates that money comes in and goes out can have a surprisingly large effect on cash flow, and poor planning in this regard might mean dipping into an expensive overdraft unnecessarily. As best you can, forecast for when you expect money to arrive and leave the accounts. This will leave you better prepared, less likely to experience short-term issues, and less likely to need help with your cash flow.
How can you solve cash flow financing problems?
Cash flow finance is widely understood to be the lifeblood for businesses both small and large. Without it, it can be difficult to meet those monthly commitments, such as rent, wages and product costs. Unfortunately, it’s very common for SMEs to have cash flow problems, arising for all manner of reasons. Fortunately, there are a few different ways to improve cash flow:
It seems obvious, but one of the key ways you can resolve cash flow problems is to improve the difference between your income and outgoings. Generating new revenue is clearly the trickier element to this, so you should look to free up cash each and every month as a first port of call. Many businesses are surprised by the amount they can save through a diligent fact finder that looks at where costs could be saved.
This isn’t about having a knee-jerk reaction and making sweeping changes to the business - it’s about looking at how small savings can quickly add up. Contracts for things like energy and insurance are two places in which another look at the market could end up saving you a considerable amount of cash. Go to the different parts of the business, and see where people have ideas to reduce costs without fundamental changes to the way things work.
Late invoices are one of the biggest contributors to cash flow problems. Often, a business is successful, and balancing income and outgoings isn’t too much of a problem. However, if customers aren’t paying their invoices when they should, it can make bringing cash into the business really difficult. There are a few ways you can improve this, at various stages in the process. The first thing to bear in mind is that you need to make invoice terms as clear as possible, which will reduce the likelihood of customers pushing things to the limit. You’ll also need to take a proactive approach to chasing invoices when they fall late - never allow a late payment to be your own fault for not chasing enough.
There are a variety of financial products available on the market that can help you get round cash flow issues. Overdrafts can be useful if you find that you rarely have cash flow issues, perhaps at certain points of the year. You can use the cash when you need it, and then repay when things even out, without having to have an ongoing commitment or negotiate every time you need finance. Invoice Finance is another option that seeks to resolve the issue of cash flow, particularly when it comes to late payments of invoices. In short, it means that you don’t have to wait for a customer to pay to receive money into your account.
Are slow invoice payments causing you cash flow funding problems?
Release up to 90% of the invoice straight away with our invoice finance solutions.
Have you thought about Invoice Finance as a cash flow solution for your business?
Invoice finance allows you to release cash quickly from your unpaid invoices.
As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.
Invoice financing products from Novuna Business Cash Flow:
What our customers say
A very professional and yet friendly company to deal with.
The whole team have been keen to understand how our business works including the peculiarities of our industry and as a result, our specific needs for working capital. Subsequently, they have been supportive of our changing needs and open to suggestions to help improve our business model and profitability further.
Competent staff, slick technology. Would recommend
Halo is one of the smartest bits of tech I have seen & every team is only as good a it's people and I would like to take this time to actually specifically point out Alex Hall & Claire Davies. Alex is an account manager that has continually improved during our time working together and is a real credit to Novuna. Claire has been exceptional from start to finish; meticulous in her work and very patient with us at every temp - an absolute star. It is a shame that the email address went to a generic platform and not each individual. I totally understand why this works better for companies but it did mean that the personal element was lost meaning that starts like Claire will be harder to identify from a customer point of view.
High recommedation for Novuna Business Cashflow.
My company was in need of invoice factoring to assist with the cashflow due to the nature of debtor days with our clients. After looking at a number of options, the right decision was made to work in partnership with Novuna Business Cashflow. Right from setup through sales to customer service, the communication and support has been outstanding. Providing me with all the information I needed regarding new clients coming onto our books. The system they use is so user friendly and the drawdown payments are very efficient in the fast moving world of temporary payroll. This has allowed my company to look at positive growth knowing we are safe financial hands. I would highly recommend Novuna Business Cashflow 10/10.
Set up went well and communication was good.
Syed and Vipul were extremely helpful top class service
Very helpful from the start
Great people made this process very straightforward.
Jemma from Novuna (formally Hitachi) was brilliant. Worked with us throughout the process and succeeded when some others had failed. Carried out the necessary checks with a smile and cheery demeanour, making what would have been a laborious process quite manageable.
Teething problems -Maybe ?
It's still early days so I may alter this review at a later date. However with retentions and concentration limits and other items, were finding were not getting 85% up front, were probably getting nearer 70% Also when a customer pays the remaining allegedly 15% due to us seems not to be credited to become available. For instance a customer paid Â£6918 and a customer paid Â£1300 hence we should see an extra Â£1330 available (15% of both these payments). However availability seemed to go down and not up by Â£1330 !!! Hard to work out where this 15% has actually gone ? I'll re-submit this review when things become clearer.
I found Hitachi true to their world in every aspect of the service they promised. I can't recommend enough.
Excellent Customer care and service.
Excellent customer service from start of initial conversations, right through to finally becoming a customer. The whole team involved are a credit to Hitachi, they were accommodating and informative the whole way along the process. I would highly recommend Hitachi to future clients and business associates. Thanks Alan.
I really enjoyed working with the Hitachi team, professional, helpful and really good people to deal with. They have made what could have been a very difficult experience a pleasure. Very happy to recommend them.
Hitachi made the process of moving factoring facilities painless, bearing in mind we previously had our facility with the same provider since 1997. I cant fault Hitachi's staff and processes and we are delighted with the move.
Staff excellent all together professional