Invoice finance can increase cash flow by raising capital that can be immediately reinvested in the business. When creating a sales invoice and sending it to a customer, please provide a copy to the invoice funder. After that, up to 90% of your bill will be paid immediately. The balance minus fees will be paid when the customer pays the invoice.

Another big advantage is that you don’t have to track your customers for payment. The invoice finance person will act for you. You don’t have to wait 30 days, 60 days, or even 90 days or more for your invoice to be paid. Instead, you will receive a payment within 24-48 hours of billing. Effective cash on delivery for you while you continue to provide your customers with the credit terms you are accustomed to.

How does Invoice Finance work?

When you start incrementing your sales invoice and sending it to your customers, you simply provide a copy to the invoice funder who can instantly pay up to 90% of the invoice amount. Apart from this advantage, the invoice finance person will take care of everything, so you don’t even have to track your customers. As already mentioned, long and deferred payment deadlines are no longer needed. Instead, you will receive a payment within 24-48 hours of billing. This effectively means that you have worthy cash on delivery while continuing to provide your customers with normal credit terms.

  • Send your invoice details to your financial service provider
  • You will be paid a percentage of the face value of the invoice, usually within 48 hours (each factoring company will drive a different percentage based on its own risk criteria)
  • Depending on the type of invoice financing, we will either perform payment tracking as usual or have the invoice financing provider manage that part of the customer relationship for you
  • When the debtor pays, the remainder of the previously unpaid bill, less the service fee, is returned

Types of Invoice Finance

  • Factoring
  • Spot Factoring
  • Invoice Discounting

Factoring

With factoring, you create and send an invoice as you normally would, and send a copy to the factoring company. Upon receipt of up to 90% of the value is available for the factor and should be used immediately. Then, if the customer chooses to pay you, the unpaid payment will be paid after deducting the facility usage fee. Next, the relevant factoring company manages the sales book and performs credit management on your behalf. This eliminates the need for time-consuming searches to find the payments you need from your customers.

Spot Factoring

Spot factoring (also known as Selective Invoice Finance) gives you the flexibility to choose which invoices your company will use to raise the working capital it needs. In addition, Spot Factoring does not have a minimum contract period, so you can use this service as many times as you need, or only once, to achieve the cash flow status your company needs and deserves. All loaned invoices are first sent to  Spot Factor, where up to 90% is paid.

Invoice Discounting

The invoice discount process works like factoring in that you can withdraw money from the invoice before paying the customer. However, the difference from invoice discounts is that you maintain the credit management process internally and continue to process the process

yourself without external assistance. This process is typically sensitive. That is, the customer does not know how your business is funded.

Advantages

  • The cash flow improved
  • Payment term extendability
  • Funding availability quickly
  • The amount you borrow grows well

The cash flow improved

The most important benefit of invoice financing, and the main reason why so many businesses choose this option, is that it can improve cash flow. Businesses have more options to cover their expenses and take advantage of new opportunities when funds are quickly available through quick settlement of invoices.

Payment term extendability

Payment terms of 30, 60, or 90 days may be a hindrance to small businesses, but if your business does not offer payment terms that are considered standard in your industry, customers may go to your competitors. Invoice financing permits companies to extend payment terms to their customers without affecting their cash flow adversely.

Funding availability quickly

When you first contact a provider, you can usually set up the invoice finance facility within a week or two. After a contract is signed, an invoice is usually released within 24 hours of being sent to the customer. Thus, you can respond quickly to liquidity bottlenecks and raise funds for other operating costs.

Conclusion:

As we conclude that we see using Invoice Financing lets you avoid bad debt on your business by receiving credit protection that can protect you against late or unpaid invoices. Finance companies allow business owners to increase cash flow by using outstanding invoices and charging up to 90% of the invoice value. Businesses have a variety of options for financing their unpaid invoices depending on the situation and degree of control they prefer.