Invoice finance is a useful tool used by a number of businesses in the modern age. It involves selling your customer invoices to a third party (the factor) for a large percentage of its value (usually around 80%). While that might not sound attractive upfront, there are some significant upsides to consider. Once the customer has paid the accounts receivable in full, the rest of the money is paid to you with the factor’s fee deducted. Here are some of the advantages of this.
Invoices usually take between 30-120 days to be paid, which is an incredibly lengthy time for businesses to wait, and they can often stack up, causing significant delays in payment as well as cash flow problems. These can be a significant threat to a business’s survival, especially startups which need capital to prop the business up in its early stages.
Invoice finance eases these cash flow problems with an instant injection of cash by the third party factor such as marketinvoice, which is usually paid within 24 hours of an application being sent. This can then be used to finance business operations and keep it ticking over until the customer pays the invoice.
Saves Time and Resources
Chasing up invoices and managing them takes up both time and resources which are also costly to a business. Invoice finance removes the need to extensively track any given invoice, allowing you to invest time and resources elsewhere in the business. Also, it give your accounting team more time to work on other financial activities. This has further savings like avoiding a comptroller tax audit.
In the long run, this could amount to significant savings overall, and your business could well be in a much better position to develop and grow as a result. With the increase cash and productivity, you can imagine how that would help your business. Many businesses find that this helps to maximize operational efficiency and keep them running smoothly on a daily basis.
There is no doubt that invoice finance can facilitate accelerated growth for the majority of businesses which use it, given the security and funding which it grants instantaneously. The instant cash injection means that bigger jobs can be taken on more frequently, given that you will always have the funds to cover them (rather than having to wait for a payment). The cash can also be directly reinvested back into the business, ensuring that it keeps moving forward and growing, which is essential for long term success.
Invoice finance is particularly aimed at businesses with cash flow issues which could directly benefit from acquiring a lump sum of capital. These companies typically have longer payment cycles that may take more than 30 days to get paid. In this case, the ability to receive payment for an invoice immediately is undoubtedly very useful. Moreover, it could well ensure your business’s long term survival. To ensure that your invoices get paid and to keep cash flow consistent, consider selling your invoices for business funding. The factoring process will help your business growth and stability.
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