Invoice Finance – the smart way to control cashflow
Insights with Infinance by Brian Coogan
Kicking off our sector on business finance is Invoice Finance, also known as factoring. While popular overseas, it’s a highly underutilised facility in NZ.
Triggered when an invoice is generated through accounting software such as Xero, it pays 80% of your invoice within 24 hours with the last 20% paid when the client pays the bill less a small fee.
Typically cheaper than an overdraft, it’s working capital in your pocket as you need it using accounts receivable as collateral, no need for any further security.
How it Works
Set up an account in your name with the invoice financier’s bank, you own all funds in the account the whole way through, set this as your default account for invoices to be paid to.
Issue the invoice, you get paid 80% within 24 hours, or more depending on arrangements.
Once the invoice is paid in full, the remaining 20% goes to you, less a small fee.
Adding a small fee for invoices over 7 days allows you to recover the costs in full.
Benefits of Invoice Finance
You cease being a bank for your clients.
Cashflow when you need it – bridging the gap between work done and getting paid.
No additional collateral – only the invoice required as security.
Supports growth - the facility grows with your business providing funding as you grow.
It’s a great option for business’s that -
Have to wait for long payment.
Need to maintain healthy income to cover expenses.
Are looking for funding without using personal assets as security.
Are in manufacturing, wholesale, services, construction, transport, contracting and more.
What if clients don’t pay?
Due diligence is carried out on regular clients to minimise the risk with bad debt risk insurance available.
For more on the above or to enquire about setting up an account go to www.infinance/insights
Never take your eyes off the cashflow because it’s the lifeblood of your business- Richard Branson.