Strong cash flow is essential to any company seeking to achieve a steady rate of growth. Healthy sales play an important part in creating the cash flow position you need, but sales alone are not enough to promote business growth. Unfortunately, there are lots of obstacles that prevent healthy sales translating into steady growth. Long customer payment terms, late payments, debt obligations and high operating costs can all detrimentally impact your business’s ability to grow.
Before you know it, rather than striving for constant growth, you feel like you’re running on a treadmill, struggling to keep up with your financial obligations rather than getting ahead of them. Instead of having money left over after paying your bills, you’re just about breaking even.
How can Invoice factoring speed up business growth?
Invoice factoring is one-way businesses that sell products and services to other businesses or government agencies can give their cash flow the boost they need to grow. Factoring solves one of the biggest barriers to business growth, namely, slow customer payments. Most businesses sell their goods on 30, 60 or even 90 days credit, but this can create a cash flow position that leaves businesses unable to capitalise on the new opportunities that come along.
Invoice factoring solves this problem by releasing up to 90 percent of the cash tied up in an invoice within 24 hours of it being issued to a customer. The balance is then received when the customer pays the invoice. So how can invoice factoring speed up business growth..?
- Remove the risk of late payments
As if payment terms of 30, 60 or 90 days weren’t enough, there is also a late payment epidemic in the UK that is inhibiting small business growth. In a factoring agreement, not only do you receive the vast majority of the value of the invoice upfront, but responsibility for collecting the payment also falls with the invoice factoring provider. They have established collection teams in place to ensure payments are made on time.
- Free up money to spend on growth
Having money tied up in unpaid invoices can limit the opportunities you are able to capitalise on. For example, you may not be able to access the working capital you need to invest in stock, take on new staff to complete an order or expand into a new product, service or geographical areas. Invoice factoring gives you the freedom to invest in new staff, equipment, stock or whatever else you need to grow.
- Take advantage of early payment discounts from suppliers
Many suppliers choose to offer early payment discounts to customers who pay their invoices in 5, 10 or 15 days for example. Releasing the cash tied up in your invoices early allows you take advantage of these discounts and pursue other growth opportunities.
- More time to focus on growing your business
The fact that the invoice factoring provider will take control of the credit control and collections process means you rid your business of a time-consuming and labour intensive task. Instead, you can focus your time and resources on growing the business.
- Freedom to pay unexpected bills
Many businesses do not anticipate just how much it will cost to run their business and sometimes unexpected expenses can come along that stop growth in its tracks. Rent rises, equipment repairs and recruitment costs can all eat into your cash flow and can make collecting capital early a necessity.
- The ability to forecast cash flow accurately
One of the biggest problems for businesses is never knowing when payments will be made. For example, if you have to run payroll in a few days but do not have the working capital to do so until a payment is received, you may have to rely on expensive short-term credit like a credit card or overdraft. Knowing when payments will be received allows you to forecast your cash flow more accurately and plan for business growth.
Get a quote
Could invoice factoring provide the cash injection you need to grow your business? You can compare quotes from the UK’s leading invoice factoring providers or call 08000 24 24 51 to discuss your needs.