Using invoice discounting to improve cash flow

Whichever business sector you’re in, maintaining a healthy cash flow is critical to your success. One way to improve short term cash flow is invoice discounting. Anil Stocker, co-founder of MarketInvoice, explains what this it is and how it can help in some situations.

Cash (flow) really is king.

It’s a phrase that’s often over used, but if you’re looking at your business’s finances there’s nothing more important. Cash flow is everything. You can be making a healthy profit but still worry that at the end of the month there just isn’t enough cash in the bank to pay your staff.

In B2B sales, especially, there’s a need to keep a constant eye on the bank balance. Businesses that sell to other businesses can expect to be paid 45 days after delivering their work and sending an invoice. That lag can lead to real cash flow headaches.

This is a situation that’s even worse for suppliers into large corporates, like department stores or supermarkets. These big businesses have even longer payment terms – imagine waiting 120 or 150 days for your invoice to be paid. Small businesses looking to trade with these big players have to accept that they’ll have to deal with considerable cash flow issues.

If your business struggles with cash flow, there are a few things you can do. You can focus efforts on effective credit control or ask your customers to agree to shorter payment terms.

A solution for around 45,000 UK businesses is invoice finance. Invoice factoring or discounting is a finance product that gives your business a large chunk of the funds due in invoices upfront. Sign up to use invoice finance and you won’t have to wait for your customers to pay you- you’ll know exactly when you’ll get paid.

To many business owners that certainty alone makes the fees associated with invoice discounting worth it.

This type of finance has suffered from a bad reputation for years, having been linked to insolvency, long contracts and hidden fees. But the industry is changing, and if you haven’t looked at the possibility of funding your invoices recently you might be surprised at the range of new options available.

There are more and more selective invoice finance providers around, meaning you don’t have to sell your entire debtor book, which can be expensive and inflexible.

With MarketInvoice, for example, businesses can fund individual invoices online without personal guarantees or debentures. Selling your invoices one-by-one, on a pay-as-you-go basis, can give you the cash flow certainty you need without giving up control over your debtor book.

Businesses that use this type of solution are growing and thriving. Without the burden of worrying about cash flow, they’re able to plough back the funds available into their business.