As you plan for 2022 and beyond, what will allow your business to recover quicker or grow more moving forward?
Are you resolving to ease the cash flow pressure on your business in 2022? How much pressure would be lifted on your working capital if you could close the gap between paying your overheads, wages, contractors etc and actually getting paid yourself?
How much more time would you have to get on with running your business, instead of juggling your business’s finances?
If you provide payment terms to your customers, then you could be operating in some senses by watching the calendar for when your invoices are settled.How many more opportunities could you take on NOW if your business operated on SAME DAY payment terms with your clients?
Cash flow or working capital, however you want to term it, is what allows your business to operate, trade and essentially exist. That sounds like an over simplistic statement, but the reason why companies use cash flow forecasts is to stay one step ahead in ensuring the flow of cash in their business.
Cash flow provides for a wide range of purposes such as wages, fixed overhead costs, paying suppliers and increasing or diversifying your activities as business conditions dictate – or opportunities present themselves. When cash flow dries up, your trading activities can cease up, and this can prove terminal.
Even if your company has not been directly impacted by the pandemic, and suffered lower sales, productivity or even a forced closure, it is highly likely that through your supply chain, staff or customers you will have felt the effects in your cash flow; virtually no business has remained directly or indirectly unaffected.
And even in the extended periods since last April when we may have felt that ‘normality’ was on the horizon, other factors such as the global supply chain crisis, labour shortages and price inflation have impacted the majority of companies in the economy.
In the current economic environment it is very easy for you to become the ‘stretched middle’ of the supply chain:
· your suppliers or manufacturers may have short or up-front payment terms in advance of you receiving the goods or materials
· your clients may not pay you for delivered end product or services for 2 to 3 months after delivery
If that is repeated on every transaction that you do, can you afford to keep funding that cycle plus other overheads for the months in the middle? Or will that leave you stretched? Or worse?
Invoice Finance may not be the most suitable product for every part of the economic cycle – but think of it another way: what other financial facility will pay you for most of the work that you have completed just a few days after you have completed it, when your customers won’t be settling anything with you for another 60 to 90 days?
We see this as the clearest demonstration of the ends justifying the cost of the means – many businesses won’t be able to manage without these facilities in the coming economic climate – and we consider Invoice Finance will likely be one of the best cash flow conservation tools available to companies.
· It’s flexible and can adapt to most sectors and business models; it fits with business conditions and turnover, unlike the rigid structure of a business loan.
· Your company will need continued support to ensure that waiting for invoices to be settled doesn’t limit your activities – or your ambition.
If your company has an Invoice Finance facility in place you might be wondering how we could help you. You may be able to benefit from an improved funding rate or lower costs? As you would do in your personal finances, it pays to look for alternatives that may be more suitable and/or offer you improved terms.
Several types of Invoice Finance products are available, and we can help you identify the most suitable solution for your business:
· Invoice Discounting – The simplest form of invoice finance. You keep charge of credit control, and get paid up to 90% of your invoice’s value on the day that you issue it to your customer, with the balance when they settle.
· Invoice Factoring – As per Invoice Discounting, plus the lender manages your credit control – this can free up your time to get on with running the business.
· Selective – You select either the clients or the individual invoices to put into invoice finance, so you only use the facility when your cash flow requires it.
· Specialist Sector? – Construction Finance, Recruitment Finance and Professional Services Finance are just a few examples of specialist products that could be tailor made for your sector.
Please Ask Yourself This Question:
As you approach and plan for the next 12-24 months, is it likely that you will ALWAYS have the cash flow necessary to meet wage bills, pay suppliers, or grow your activities, without the certainty of knowing that when you issue an invoice you will get funded almost immediately?
Gain the financial confidence to drive your business forward from here as if your client billing was all issued with same day payment terms; Invoice Finance allows you to fund both outgoings and opportunities with the business that you are already doing, and without depleting your cash flow.
Why not talk to me about how Invoice Finance can benefit your business?
Mark Grant, January 2022.