Having enough working capital - The advantages

Having enough working capital - The advantages

Pay your suppliers up front

If you are looking into invoice finance it is almost certain that you would prefer your clients paid their invoices more promptly.  Well, this is also true of the people who you pay on invoice; your suppliers.  In fact if you are looking into invoice finance what you are essentially saying is that you are happy to pay for a service that will give you access to your outstanding funds before the invoices are paid.  Your suppliers are likely to be no different.

Offering to pay your suppliers up front, if they agree to give you a discount for doing so, is an excellent way of offsetting the cost of invoice finance.  An immediate up-front payment of any invoice is actually of tangible financial benefit to your supplier, as it is to you.  There is no requirement for phone calls to be made to chase payment and the money will generate interest as soon as it is paid into their account.  Both are excellent reasons for your supplier to give you a discount for immediate payment.  Consider this when assessing the cost of invoice finance as it can seriously reduce the overall cost of your factoring or invoice discounting facility. 

 

Get a good night’s sleep

Wondering how you are going to pay the upcoming tax bill or even your staff’s wages can be a serious headache.  Unless you are trading from an insolvent position there should always be the money to pay the bills even though it could be tied up on your sales ledger or stock etc.  Asset based lending gives you the opportunity to release these tied up funds and put them to good use.  This can reduce the inherent stress of running and managing a business and help you to focus on other areas where your attention can more directly benefit the performance of the company.

 

Grow your business

Let’s assume your business is growing well; you have a strong order book and a good margin on your product or services.  Then you get an unusually large order from one of your main customers, well that’s great! Or is it?  Have you got the required working capital to pay for the outlay of costs the new order demands?  Often the answer is no and the only option is to ask your customer to make an upfront payment or ask for a deposit.  This may be acceptable to your customer in some cases but it also may not and if you cannot satisfy their requirements and they find someone else who can you may have lost that client forever.

Invoice finance makes this unnecessary as you will receive payment for your services as soon as the invoice is raised.  Factoring and invoice discounting are an essential tool for growth in many industries; recruitment, haulage, printing and manufacturing to name just a few. And as the size of your invoice finance facility grows to match your sales, you should never have to turn an order away.

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