One of the main ways businesses deal with cash flow problems today is to maximise their working capital and thereby boost cash flow by obtaining the cash from their accounts receivable accounts. They perform this miraculous business feat through the invoice finance practice of invoice discounting.

Business Finance Companies Represent Invoice Finance Programs That Generate Cash Flow In SMEs

Which Business Candidates Can Benefit From Invoice Discounting?

Invoice discounting is an invoice finance-type of debtor finance which infuses working capital into a business quickly, advancing approximately 80% of what a business is owned by its customers in a 24-hour period. Unlike the invoice finance alternative of debtor finance and factoring, invoice discounting is designed for funding only, and, therefore, is suitable for companies or SMEs that show they have good control over their credit.

Invoice discounting involves a 3-step process in order for the practice to be facilitated. First the business invoices its clients. Within 24 hours, the finance company will advance approximately 80% of the value of the customers’ invoices. The remaining percentage plus a small fee is issued or returned to the business as the customers pay the invoiced amounts.

An Overnight Gain     

For an SME or small company that wants to increase its cash flow and eventually reap bigger revenues, the advantages of invoice discounting should not be overlooked. The practice enables a company quick access to as much as 80% of its receivables – all which automatically boosts the company’s working capital overnight.

In addition, companies, when utilising invoice discounting, are able to raise the needed monies for sales growth, management buyouts, mergers and acquisitions and succession plans. A business owner minimizes his risk and can utilise his security for another purpose.

Instant Funding Allows You to Invest in Other Business Opportunities Too

In addition, funding limits stay in line with a company’s sales when invoice discounting is used. Therefore, a company is able to use the sales revenue to support a company as it prospers and grow. Instant funding is also accessible, making it possible to take advantage of business opportunities as they develop over time.

Bad debt protection can be included in cash flow financing as well. Therefore, a business is covered and protected if one of its customers becomes insolvent or has problems paying his bill.

By including this coverage for your business, you will be protected from those customers who are unable to pay their invoices. The finance company sets the limits in this respect, all which enables you to leave the financing arrangement in the finance company’s hands.

You also have other financing options available to you, depending on your reason for opening up your cash flow as well as the number of your credit score. Invariably, every company needs to maintain a steady cash flow in order to realize their financial objectives.

Basically, to open up the cash flow, it is easier to make full use of your accounts receivable accounts. A fast and flexible way to retain cash, debtor finance and factoring or invoice discounting make it possible for businesses to stay afloat as well as expand.