How Can Invoice Discounting Help My Business
When a company has problems with cash flow, there can be consequences that are detrimental to the stability of the enterprise. Learning how to manage a business within the constraints of the turnover is just one aspect that ensures the successful day-to-day operation. A business can still experience problems even with good management and this can affect the stability of a company. If a business cannot service customers or clients because of a slowdown in cash flow, there is every chance the customer will go elsewhere. If there are situations with cash flow that inhibit the smooth running of a business then invoice discounting can alleviate this.
Ensuring Sales Growth
When there is an opportunity to take on new customers, but there are invoices outstanding with existing clients, invoice discounting can help by injecting cash into a business which can then continue operating as if their invoice had been settled. The actual amount that a business can withdraw against the balance of an invoice is usually around 80-85%, but this can vary from company to company and there are factors that will affect this figure.
Not Wasting Time
Any small business owner or accounts receivable department will tell you that getting customers to pay their invoices on time is a major part of their day-to-day job. When a company provides an invoice discounting service, they will provide the cash and chase any outstanding invoices. This can free up a lot of time and can even result in cost savings an internal work force is reduced. Any savings on in administration are dependent on the size of the business. In many cases, the staffing would not have a real impact on costs.
Better than an Overdraft
In everyday situations, invoice discounting can be better than using an overdraft because overdraft limits areagreedusing different assessment methods. With this system, available credit from factors coincides with the value of invoices. The more business a company can secure, the quicker they can grow with this factoring. With no cash flow problems, there are no constraints unlike an overdraft with a bank account.
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