RUNNING a commercial cleaning business in Australia can deliver high income, especially in the corporate and industrial sectors.
However, working with commercial clients has one major challenge – most pay their invoices in 30 to 60 days.
The subsequent lack of cash flow can be a problem for cleaning businesses which have weekly expenses to meet such as supplies and salaries.
In many cases commercial cleaning companies cannot afford to wait that long for payment. They need to be paid sooner in order to operate properly.
Poor cash flow stops you from expanding
The problem is worse for fast-growing businesses.
Marketing for new clients can be expensive, and then once you win the contract, servicing the new clients often means also having to hire additional staff and having to buy more supplies.
If your new clients pay slowly, you have to fund these expenses out of your own pocket and wait months to be paid back.
In the real world, few companies can afford to grow this way.
We have all heard the adage, “cash is king” and the fact is the only way to achieve healthy expansion or stay afloat is to improve your cash flow.
Two options to improve your cash flow are offering early payment discounts or taking advantage of invoice finance.
Offer discounts and hope for early payment
Some companies can improve their cash flow by offering early payment discounts to their clients. Basically, they offer their clients a discount – usually 5% – if they pay in 14 days or less.
While early payment discounts can sometimes improve cash flow, they have some drawbacks.
If a large client generally takes 30 to 60 days to pay invoices, it’s unlikely they are going to change their habits
Discounts for early payment are voluntary and that means your client can choose take them – or not – based on their cash flow.
You never know when they will pay. Worse still, some clients may take the discount but still pay you in 30 to 60 days.
Unfortunately, this scenario happens often in Australia. Recovering the unpaid portion of the invoices is difficult and can upset your client relationship.
The long-term problem is that you have set a precedent with your client that you offer discounts. Clients can – and may – use it against you to demand further discounts once your cleaning contract is up for re-negotiation.
The smarter solution
A better way to raise capital is to sell your invoices to The Invoice Market.
This solution can provide your commercial cleaning business with immediate cash flow. You can use these funds to pay salaries and buy supplies, and keep doing what you do best.
More importantly, you can use invoice finance to grow the business. That’s because you can finance invoices from new clients and get paid immediately.
The financing process is fairly simple. You work with The Invoice Market to finance your invoices in two instalments.
The first instalment covers up to 80% of the invoice and is deposited into your account as soon as you submit the invoice for financing.
The second instalment, the remaining 20%, is deposited to your account once your customer pays the invoice.
The service fee is deducted from the second instalment.
Invoice finance is flexible and easy
One of the major advantages of invoice finance is that it’s easier for cleaning companies to access than conventional financing.
The most important requirement is to have good commercial or industrial clients.
If your clients have good commercial credit and pay their invoices reliably, you have a good chance of qualifying.
Some traditional cash flow financing options require you to factor all your invoices. With The Invoice Market, you can choose to sell multiple invoices, or just one of them and you can select which debtors you would like to fund without the requirement to sell your entire debtor ledger
Obtain a quote for invoice finance today.
The Invoice Market is a leading invoice finance company and can provide your commercial cleaning business with a competitive quote. For more information, fill out this form or call us on 1300 694 686.