The importance of speed for invoice financing

Thursday 21st July 2022

Cash flow problems often occur due to the lengthy periods between the provision of goods or services and the invoice payment, with some industries suffering more than others. The last thing any business owner wants is to experience a curtailment of business operations due to a cash flow problem that results from this delay.

Good cash flow allows a company to not only be in control of their stock but to also act quickly when growth opportunities occur or where market conditions shift unexpectedly. If a business is growing quickly, financing that growth can be tricky and many traditional bank loans aren’t geared up to meeting the ebb and flow of the cash flow needs of many businesses. The ability to forecast effectively is difficult and deciding on the amount of loan needed is hard to get right.

Invoice financing can offer many businesses the flexibility required if and when they need to react fast. Providing cash from their unpaid invoices at speed can enable a business to make decisions knowing that their cash flow can cope, allowing for businesses to plan effectively for the future.

Finance companies can also chase up payment on behalf of their client, saving them time and resources and freeing up staff to focus on growth.

Many industries can benefit hugely from invoice financing, below are a few examples:

The Construction Industry often involves hiring a hierarchy of contractors and sub contractors and cash can take a long time to trickle down to the people at the bottom. This can jeopardise a company’s ability to compete with those who have a more reliable cash flow. Invoice financing allows for the smaller and less established companies to receive funds straight away from work already completed. Competition with more established companies now becomes possible as suppliers and workers can be paid on time and more workers can be taken on if required.

Logistics industries often require drivers at short notice for one off deliveries. Without available cash, planning for this can be difficult. A speedy cash injection from invoice financing means those extra jobs can be taken on allowing flexibility to be built into their operations. The ability to compete with the larger and more established companies is now possible.

Manufacturing companies with their distinct costs can find that the ability to grow and plan for the future is curtailed by insufficient cash flow. Without quick receipt of payment for goods, materials can’t be bought, extra staff can’t be taken on and rent can’t be paid, putting the future of the business at risk. Receiving cash from invoiced work straight away through invoice financing can help companies in manufacturing maintain control of their cash flow and plan better for the future.

Professional services and any company offering credit terms to clients, including architects, legal firms and financial companies, can find that a wait of up to 90 days before payment is received extremely restricting. The added risk of upsetting valuable clients by chasing up payments can make it stressful. Passing on invoices to a 3rd party through invoice financing and receiving payment within 24 hours can help avoid a lot of this. It can also be done confidentially with invoice discounting, saving time, money and reputation.

Any business dealing with fluctuating costs, sporadic work and situations when cash is paid out long before payment is received may find invoice financing a better way to control their cash flow and get the flexibility needed to plan ahead.

Get in touch to find out how invoice finance can boost your clients cash flow

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