Invoice Financing – The Solution to Your Cashflow Problems?

Keeping cash flowing into your small business is essential for paying bills and employees, and supplying the funds required to invest in new projects. Unfortunately getting invoices paid on time remains a constant struggle, creating major problems for the creditor. One potential solution that frees up cash is called “invoice financing”.

Under an invoice financing scheme, the client is issued with an invoice as normal. At the same time, an invoice finance provider pays a certain percentage of the total value to the creditor – usually between 85% and 95%. The creditor is then free to continue business as normal.

The finance provider then assumes responsibility for chasing down the debt and ensuring outstanding invoices are paid. Once the debtor pays the invoice, the invoice issuer is paid the balance of the outstanding monies, less an admin fee charged by the finance provider.

Invoice financing provides a way for business to access “their” cash quickly, avoiding debt and other, more costly, loan and financing schemes. By passing on the responsibility for chasing invoices, small businesses are then freed to spend to spend the time saved on other tasks that will better benefit their customers and company.

Invoice financing is just one way to increase cashflow however. As always, you should seek professional advice before entering into an agreement with an invoice financing provider. Your accountant will be able to advise on this and other tools you can use to improve cashflow.