Invoice Finance For Business – Something To Shout About.
- November 2, 2023
- Posted by: Paul Ransley
- Category: Blog
As a provider of invoice finance for small businesses, it’s not uncommon to encounter concerns from business owners about disclosing their financing arrangements to customers.
However, it’s essential for these entrepreneurs to recognize that invoice finance is not something to be ashamed of, but rather a responsible and strategic financial tool.
Openly communicating this arrangement can potentially demonstrate to customers the stability and forward-thinking approach of the business—a move that can foster transparency, trust, and flexibility in working relationships.
In this article, we’ll delve into the importance of being forthright about invoice finance and how it can benefit both the business and its customers in the long run.
A great tool for doing business
In reality, invoice finance, or invoice discounting as it was known to an older generation, is a great tool for small businesses experiencing lumpy cash flow or who need funds to capture new opportunities and boost growth.
It is simply a strategy to get your hands on cash as soon as possible rather than having it locked up in your receivables while you wait for your customers to pay.
This ready access to working capital means you are able to provide a better service to your customers and build stronger relationships with your suppliers.
The added bonus is that because you are receiving payment for services rendered, it doesn’t go on your balance sheet as a loan.
Invoice finance is mainstream
Invoice finance is a mainstream alternative to traditional business funding options. It has been around for centuries – some say since the time of Cleopatra.
Last year, the Australian invoice finance industry turned over close to $62 billion dollars.
More than 6000 companies used invoice finance to raise working capital – most of them strong and on a growth trajectory.
According to the Debtor and Invoice Finance Association of Australia, the industry experienced an 8-fold increase in turnover between 1999 and 2010.
A responsible option for your business
Think about this:
Isn’t improving cash flow by turning unpaid invoices into immediate cash a more responsible way of doing business than shackling your small business with more long-term debt?
Why should somebody put their family home at risk to raise working capital when a debtor finance arrangement, which often requires no property security, will do the job?
It doesn’t make sense and wisely thousands of Australian business people agree.
Persuasive arguments for invoice finance
Here are some persuasive arguments you can use if you think customers will judge you poorly for using invoice finance:
- Reassure them that you would not have been approved for funding if your business wasn’t sound.
- Explain invoice finance company is just a management tools to ensure you always have adequate cash flow available to serve them and excel at meeting their needs.
- If you are involved in a short-term single invoice finance arrangement, explain that you still retain control of your accounts. No one else has their hands on your business
- If you have a long-term contract and finance your entire debtors ledger, point your customers to the figures which demonstrate how popular and effective this form of raising finance has become.
Embarrasment about using invoice finance is unfounded
Like many things we fear, our concerns tend to be unfounded. Many first-time users of invoice finance begin the conversation with their customers only to discover that they also have an invoice financing arrangements in place.