Advertorial
By Josh Hall for SimplyBusiness.co.uk
Invoice Finance and factoring are important tools for growing companies. As the country begins to emerge from the economic slump, many firms are trying to take advantage of the prospects for expansion that are beginning to present themselves. At the same time, other businesses may need a helping hand to smooth over the cash-flow problems that have inevitably resulted from an extended period of suppressed demand. Invoice finance and factoring products can help firms of almost any size to fulfil their potential in these challenging times.
Despite its numerous and important uses, many people are wary of
invoice finance, for a variety of reasons. Let’s look at some of the most common misconceptions.
Myth: Invoice finance damages your relationship with customers
Some people believe that customers’ faith in your business will be undermined if you are found to be using
invoice finance services. This is partly inspired by the mistaken notion that invoice finance services are the preserve of struggling businesses. In fact they are not – many firms
utilise invoice finance and factoring to expand, rather than to survive.
It is true that, in most cases, the invoice finance provider will take on the task of
chasing invoices for you. But, crucially, your customers need not know anything about this. An increasing number of providers offer ‘transparent’ services, meaning that any communication with your customers will appear as if it has come directly from your company. The process can be entirely seamless, with your customers unaware that any third party is involved.
Of course, aside from the fact that you can draw on your invoices almost immediately, invoice finance also rids you of the arduous process of hassling clients for payment. You will instead be left free to deal with what you are good at – running your business.
Myth: Invoice finance is too expensive
Invoice finance is a service and, like any other service, it comes with a price. But the cost of invoice finance is significantly lower than many people seem to think.
You will normally pay a service fee to cover the day-to-day management of your invoice finance facility, and to cover the costs incurred by the invoice finance partner in looking after your purchase ledger. This fee is normally calculated with regard to your turnover; you can expect to pay between 0.3 per cent and 0.5 per cent of your turnover as a service fee. Aside from this you will just pay interest on the value of each invoice. This is normally a fixed rate, and can vary from provider to provider.
It is important to consider the cost of
invoice finance in the context of other financial products. Without invoice finance you may, for example, need to take out a loan or extend your overdraft. These tools can be significantly more expensive and, in this time of credit scarcity, significantly more difficult to come by.
Myth: Invoice finance is only for struggling companies
There is a continuing sense that
invoice finance and factoring products are necessary only for firms that are in some sort of financial trouble. While they certainly have useful applications for businesses that are facing temporary cash-flow difficulties, they should not be seen as useful only in these circumstances.
As the economy begins to look up, your business may well be faced with opportunities to grow – but in order to grasp these opportunities you need cash on hand. Invoice finance and factoring provide you with a quick and painless method of securing the money you need to make the most of those opportunities. A significant number of mergers and acquisitions rely on products of this sort, and there is no reason why your business should not also make them work to your advantage.
Finally – think of the benefits
Invoice finance products provide businesses of any size with an opportunity to regulate their
cashflow and invest for growth. While it is true that these services have a price, if you utilise them efficiently this will be quickly offset by the benefits. Regardless of your situation, there is a high chance that invoice finance can be a positive addition to your business.
Invoice finance arrangements should be thought of as a partnership between you and the provider. In order to make the most of these products you must find the right partner. Comparison services like
Simply Business can introduce you to a provider that will take the time to understand your business, and will be committed to seeing it grow.
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