Big or small, many businesses experience cash flow problems. An increasingly competitive commercial environment has helped to drive down the prices of many commodities in recent years, significantly reducing company profit margins. As a result, many businesses find themselves having to walk a very fine line between profit and loss, with just one delayed payment sometimes proving enough to bring the whole company machine grinding to a halt.
One of the most common solutions to this problem is invoice financing from companies like Touch Financial. Invoice financing is an umbrella term covering two main methodologies: invoice factoring and invoice discounting. Although there are some differences in practice between the two, their function is essentially the same: to provide businesses with instant access to funds by levying loans against their invoice portfolio.
For many, these methods are a godsend. The benefits are many and varied, and as a result invoice financing has experienced a dramatic increase in popularity over the last decade. If it’s an option that you’re considering, then here are just three of the benefits that you ought to know about:
Immediate Access to Funds
The main boon of invoice financing is, of course, that it offers immediate access to funds. Many businesses simply can’t afford a stop-and-start cash flow; when they make a sale, they need to see that money immediately transferred into their account. However, so many industries are accustomed to delayed payments that insisting on instant settlement can alienate customers. Invoice financing offers a brilliant solution: businesses can quickly access around 90 per cent of the value of their sales ledger, without having to demand that their customers pay on the spot.
One of the reasons that invoice financing is often preferred over other financing solutions is its flexibility. This is largely down to the differences between factoring and discounting, which enable business owners to actively choose how much or little they want providers to be involved in their business, in terms of responsibility, visibility, and input. Larger businesses are often loathe to allow third parties to deal with their customers, for example, but if they choose discounting then this can be easily avoided. Smaller companies, on the other hand, often appreciate administrative assistance, making factoring a better option for them.
Although discounting does not carry this boon, invoice factoring can also be a fantastic way for smaller companies to delegate some responsibility without increasing their overheads. The administrative side of dealing with invoices can be incredibly time consuming, yet factoring providers are able to take care of this on your behalf, saving you time, a large amount of stress and, potentially, the money it would take to pay someone to assist you.
Could invoice financing be of benefit to your company?