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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.
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.
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.
A better way to raise capital is to sell your invoices to OptiPay. 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 OptiPay to finance your invoices in two instalments. The first instalment covers up to 90% of the invoice and is deposited into your account as soon as you submit the invoice for financing. The second instalment, the remaining 10%, is deposited to your account once your customer pays the invoice.
The service fee is deducted from the second instalment.
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 OptiPay, 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
This is Paul, he is one of the directors of UVS, a labour-hire provider to the construction industry. Here’s what he has to say about how OptiPay was able to help his business grow and succeed. Contact an OptiPay expert today to see how we can help you.
OptiPay offers several different funding solutions and services, one or more of which charges no interest and has no long lock in contract period, called the Fully Flexible funding option. Conditions, fees and charges apply to some of the Services provided, which may change, or we may introduce new ones in the future. Full details for all funding options (Services) including any fees and charges which may apply, is available on request. Lending criteria apply to approval of credit products. This information does not take your personal objectives, circumstances or needs into account. Consider its appropriateness to these factors before acting on it. Read the funding agreements provided, for your selected funding solution (product/service), including all the Terms and Conditions contained in agreements provided, before proceeding. *T&Cs: Minimum 12-month invoice funding contract with OptiPay. Direct clients only, offer doesn’t apply to broker introduced clients. All standard credit terms and conditions apply including credit assessment. Not applicable to existing clients.