Invoice financing is a great way to ensure consistent cash flow in your business. When dealing with slow debtors — having a third party purchase your invoice alleviates a lot of the business pains caused by slower payments. Consistent cash flow also means you can spend more time allocating capital to internal resources, infrastructure and other areas to grow your business.
Here’s why invoice financing should be at the forefront of your mind during this challenging time of the year.
The Joyous Yet Challenging Arrival of Christmas
Christmas is quickly approaching. There are few other times during the year when businesses feel the pressure like they do at Christmas. One of the most common reasons is the fact that businesses simply don’t have the same cash flow during this period of time as they do at other times. Many companies fear that they might go out of business due to several factors like pricing strategies, their employees taking annual leave or too many public holidays too close together. Invoice financing provides a welcome influx of cash during the time of the year when it is needed most. This ensures businesses can get off on the right foot in the New Year.
Extended Supplier Payments
Bigger companies with larger budgets, who are able to weather setbacks more easily often extend their supplier payments for up to 90 days. Woolworths, for example, now has a sixty-day term. A reason for this is to maximise the use of their capital so they can fund additional projects. Another reason may be to preserve cash during a business downturn. While extended payment terms impact these companies in a positive fashion (often increasing business efficiency), the companies waiting for payments are usually the ones that pay the price. Immense pressure is placed on business owners who have to compensate for the delay by reallocating resources and expenditure. Invoice financing is a great way of maintaining cash flow in a business whilst key stakeholders are making decisions around where to best spend their cash and resources.
Effectively Reduce Bad Debt
Bad debt can put a drain on the finances of a small or medium-sized business. Considering a typical business has several potential bad debts, it’s easy to see how bad debts can be devastating to business health. Not only does bad debt require nearly constant maintenance in the form of invoicing and following up, it also costs businesses money by having to call in outside agencies to deal with the issue. Because Christmas is already an uncertain financial time, invoice financing removes that burden from businesses to ensure that there is enough cash to maintain business health.
Make sure your business starts the New Year off right with the additional cash flow you need without the threat of supplier payment extensions marring your progress.