Helpful Tips

10 Tips for Smooth Invoice Financing

Invoice Finance is a great way to manage cash flow as it provides a business with immediate and ongoing access to money for grow – at a very low cost! It is ideal for businesses needing working capital, investing in marketing and staff salaries, or even just for planning for steady growth. 

Businesses who trade directly with other businesses can raise substantial sums of money by accessing the funds tied up in their accounts receivable. Because most B2B customers take 30, 60 or even 90 days to pay their bills, accessing the money in a matter of hours can be a game-changer for growing firms.

Getting accepted for invoice finance, getting set up with a convenient online account, and managing the invoices you want to present for financing has never been easier thanks to flexible non-bank providers like OptiPay. However, the process will be even smoother if business owners and finance directors follow a few simple steps. 

Do these 5 things for smooth Invoice Financing

1.   Make sure you invoice accurately and on time. This is good advice to any business, because without invoicing you won’t get paid. For those using invoice finance, it is doubly important because a delay in sending an invoice – or having to re-submit one because of a mistake – will have a proportionately bigger effect on your cash flow. Remember, you could have that money within 48 hours.

2. Remember to put the correct bank details on the invoice. Most invoice finance provides will either want the money sent to an account in your name that they control or have view and control access into your bank account, the reason for this is simply – the invoice finance provider is giving you up to 90% of the invoice value upfront, so when your client pays in say 30 or 60 days time they cannot pay you the 100% (again), when you are entitle to only the 10% (less the discount fee charged by the invoice finance provider).

3. Choose a flexible provider. There are many different forms of cash flow financing can be structured, but the key difference is between full-service provides, sometimes known as full ledger funders and flexible invoice funders that give you a large degree of choice over which invoices you present for funding, instead of being forced to discount every invoice you issue all the time.

4. Insure your invoices. Not getting paid because a customer goes out of business is bad enough. It can be even worse if you have already been advanced the money, and spent it. Fortunately, insurance against this can be arranged as part of the invoice financing deal you sign up to. This will give you peace of mind that in the event of insolvency of your customer/s, the insurer will pay-out 90% of the invoice value, eliminating the any recourse back to you personally.

5. Use the money wisely. Invoice finance isn’t just there to give you a buffer against cash flow problems: it is a valuable source of ongoing funding which should be used for things like stock; wages; and operating expenses in order to fulfil purchase orders to continue the growth of the business. Invoice finance is primarily used for growing businesses and is seen very favourably by debtors as they then know that your SME is well funded and can deliver on orders.

Don’t Make These 5 Mistakes!

1. Not providing supporting documentation. When applying for an account with an invoice finance provider, things will be a lot quicker and straightforward if you provide all the documentation relating to contracts that you have, your order book, and the full company details including your aged receivables ledger, aged payables ledger and most recent accounts.

2. Trying to hide your financing choices from your customers. Many small business owners don’t realise that clients will be informed when their invoices are offered for financing, or they think this will cause a problem. There is no reason to worry: other businesses are comfortable with you raising money – they like to do it themselves and they will like the fact that they are dealing with your business knowing it well funded to deliver on their needs!

3. Not understanding the fees and charges. The terms offered by cash flow finance providers vary considerably, and the total you end up paying for a very similar service can be very different from one provider to another. Read the small print, ask questions, and choose the right company for your business.

4. Failing to consider your returns policy. A generous returns policy is great for your customers, but it has implications for invoice financing. Try to get any possibility of returns out of the way before invoicing as the invoice finance provider will only ever provide upfront cash based on the invoice value less the value or possible value of any returns.

5. Not having a fixed set of Terms and Conditions. This is a mistake too many SMEs make. You should get a good document drafted by a lawyer, because you only need to drop the ball once with a customer: it will then back up all your contracts and invoicing and make life much easier for everyone. The same Terms and Conditions can appear on your website to keep consistency.


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