How to improve cashflow within your business and the benefits of Invoice Financing

invoice financing

By Bryan Gray, Business Development Manager, Bibby Financial Services Ireland, 26 March 2019

Over half (57 per cent) of Irish SMEs citing a timely collection of customer payments as a real issue. While you can never guarantee that every customer will pay a bill on time, there are ways to ensure you get paid earlier and improve cashflow within your business. If you’re a business that sells to other businesses, you’ll no doubt receive a purchase order from your customer, agree on a quote for your goods or services, and then send an invoice once the work is completed. However efficient your processes, if you have to wait 30, 60, 90 days or longer to receive payment, you’re likely to be restricting your cashflow and limiting your growth potential. 

Tips to Improve Cashflow within your Business

Whether you’re a start-up or looking to take an established and successful business to the next level, there are a number of practices SME owners can put in place themselves to ensure cashflow challenges don’t arise, including the following:

1. Keep up-to-date records

Whether you have a finance specialist within your business or not, you should have some level of financial reporting so that you can keep a close watch on payment times. Keep an accurate and up-to-date record of your business’s cashflow so you can keep an eye on the movement of money to and from your company. This will ensure that you can identify payment issues earlier, helping you to take steps to resolve them. Don’t forget to ensure that your invoices clearly state your company’s terms.

2. Diversify your customer base

Although this is easier said than done in an increasingly competitive environment, ensuring that you have a good spread of customers is the best way of reducing your exposure to bad debt. Try not to have over 20 per cent of your business with one customer – if their business nosedives, yours will too from over-exposure. If you find yourself in this situation, try and drum up new business through networking, cold-calling or by ramping up your public relations and marketing.

3. Effective Credit Control

Before you begin working with a new customer, it’s important to do a little research beforehand. Do a financial check before offering them credit and ask for and check a selection of business references. Due diligence and effective credit control are paramount to understanding your customers and on-going monitoring can help you to identify potential signs of bad debt before the problem arises.

4. Consider Cashflow Funding and Credit Control Support

An in-house or outsourced credit controller or credit control team can ensure you have effective terms and conditions with your customers, in addition to ensuring that outstanding money owed is followed up when required. In the long term, this will save you time and money as well as giving you peace of mind in the knowledge this risk is being properly managed and allowing you to focus on growth.

5. Invoice Financing Solutions

Invoice financing is a step above credit control, as soon as an invoice is raised, you send it to the invoice finance provider, who will advance up to 90% of the value within 24 hours. Then, once your customer has made their payment, the remaining balance is paid to you, minus any fees. The two funding types that can benefit businesses are factoring and invoice discounting. The biggest difference is that the invoice finance provider will be collecting customer payments. 

The Benefits Of Invoice Financing For Your Business

Invoice Finance can provide a much-needed lifeline for businesses who find themselves continually waiting for payment. The main benefits of Invoice Financing services include:

  • Quickly increase your cashflow, without waiting for payments from customers
  • Reduce the impact of late payments
  • Alleviate administrative demands on your business with an outsourced credit control service
  • Pay supplier invoices quicker and take advantage of early payment discounts
  • Increase your level of funding as your turnover grows
  • Grow by taking advantage of new opportunities

Alternative lending solution providers can also deliver real value as they possess in-depth market knowledge and build strong client relationships. Often there is greater scope to consider both a business’s current and future needs, taking into account a range of factors including supply pressure payment cycles, operating liabilities, wages and currency fluctuations, and an alternative finance provider can tailor its funding accordingly to find a solution that is right for each business.

Since 2016 Bibby Financial Services has made over €70m available to Irish businesses through SBCI-backed funding, enabling them to access favourable rates and fulfil their potential. But until alternative sources of financing are more widely adopted, Irish businesses will continue to face a lending bottleneck that inhibits their progress and undermines Ireland’s wider economic growth.  If you want to avoid borrowing money and owe as little as possible in debt, then invoice finance helps to bridge long payments terms and credit control prevents late payment. 

Invoice finance shouldn’t be seen as just a funding option for businesses that are facing cashflow problems. It’s a valid way of financing the day-to-day running of your business and taking advantage of growth opportunities. For more information please contact Bryan Gray of Bibby Financial Services at