Cash flow is the number one challenge for business owners. Without working capital, you can’t pay suppliers, take on new staff, and grow your business. Over 90% of SMEs state that lack of cash flow has restricted their ability to generate revenue over the previous 12 months.
Late payments are a key cause of cash flow gaps, accounting for 43% of cash flow problems. Increasing liquidity by releasing the capital tied up in unpaid invoices can be a catalyst for growth.
“Small businesses being paid faster would free up cash flow and stimulate jobs, investment and growth.”
Kate Carnell, Australian Small Business and Family Enterprise Ombudsman
Invoice Finance helps businesses to overcome cash flow gaps by unlocking the capital that is tied up in unpaid invoices
How Does Invoice Finance Work?
Once you have completed a job or fulfilled an order, it usually takes a period of 30 days for the customer to pay the invoice. If you’re one of the 50% of Australian businesses that report 4 out of 10 of their invoices being paid late, it can take even longer to receive payment.
Invoice finance helps you to turn your unpaid invoices into a quick cash flow boost to capitalise on new opportunities and cover operating costs. While a loan from a traditional lender can take up to 3 months to be approved and with no guarantee of a “yes”, invoice finance is much faster and flexible to your business needs.
You can release capital through a confidential invoice discounting solution, or an end-to-end debt factoring solution where you outsource your collections and reduce the time and resources you spend chasing payments.
How Does Debt Factoring Work?
Debt factoring is an invoice finance solution that enables you to access a line of credit using your accounts receivable ledger. You can access up to 85% of your invoice amount upfront, less our fees. Once the full invoice amount has been collected, you will receive the remaining amount.
It’s an end-to-end service where your collections are outsourced so you can focus on getting new orders and growing your business. With debt factoring, your customers may be aware of the relationship and our involvement in handling your collections.
How Does Invoice Discounting Work?
Invoice Discounting helps you to secure a line of credit using your unpaid invoices. You can access your funds within 24 hours, rather than waiting for slow-paying debtors and unpaid invoices to clear.
The outsourcing involved with debt factoring is appealing to many businesses, but you may prefer to remain as the single point of contact for your customer and keep the business finance relationship confidential.
Invoice Discounting lets you access the capital tied up in unpaid invoices without revealing to your customers that you are using outstanding invoices to access finance.
How Does Invoice Finance Help Small Businesses to Grow?
Invoice finance offers a range of benefits to help small businesses achieve sustainable growth with predictable cash flow.
Access Funding without Taking on Long-Term Debt
Traditional loans place debt onto the business. This debt needs to be serviced every month until the principal and interest have been paid in full. Invoice finance lets you access capital that is already owed to your business.
Rather than adding debt, invoice finance provides a fast cash injection without any long-term debt commitment that can impact your chances of accessing finance at a later date.
No Monthly Repayments or Interest
Invoice finance is repaid when your client settles your invoice. There are no fixed-term interest charges, and you can access up to 8095% of your invoice amount upfront, minus fees. When your customer pays the invoice, you receive the remaining amount20%. The increased liquidity enables you to cover operating costs and grow your business with predictable cash flow.
Scale-Up and Take on Bigger Contracts
Taking on big contracts often involves carrying a lot of costs until payment is collected. Invoice finance lets you capitalise on lucrative big contracts without worrying how your cash flow will be impacted waiting for the client to pay. You can access funding within 24 hours of the invoice being raised, rather than waiting 30 days or more for the invoice to clear.
Invoice finance makes it much easier to implement growth strategies and take on big contracts with new clients. You can take advantage of opportunities while maintaining working capital.
Flexible Business Finance
Invoice finance covers a range of finance solutions that can be tailored to the needs of your business. Rather than committing to a long-term debt that can significantly impact your ability to access funding for expansion at a later date, invoice finance is a fast way to raise capital to cover operational costs and unexpected bills.
Poor cash flow management is responsible for 82% of business failures. You can stay in control of your cash flow by using invoice finance to access the capital you need when you need it.
Focus on Dollar Productive Tasks
Maintaining working capital is vital for business growth. With sufficient cash flow, you can focus on the dollar productive tasks like acquiring new customers and growing your business. An end-to-end debt factoring solution enables you to outsource collections entirely, reducing overheads and time spent chasing debtors.
According to Xero’s report on the economic impact of big businesses paying Australian small businesses late, SMBs that receive slower than average payments see revenue growth that is a third lower than those that are paid faster than average.
Raise Capital Quickly to Capitalise on Opportunities
The Australian Bureau of Statistics states that 44% of Australian businesses are innovation-active. When a business opportunity arises, you need to move quickly to capitalise before you lose out to an innovative competitor.
Whether bringing a new product or service to market or creating more efficient business processes, innovation is vital for growth. But for small businesses, lack of access to additional funds is the number one barrier to innovation.
Invoice finance helps you to access funding to capitalise on opportunities quickly. You can be approved for invoice finance and receive cash in your account within as little as 24 hours.
Mitigate the Risk of Bad Debts
Bad debt can have a significant impact on your cash flow and the profitability of your business. You can begin legal action against bad debtors, but this can be a costly and time-consuming process.
Bad Debt Protection helps to mitigate the risk of overreaching with a client that doesn’t have the means to pay. With an end-to-end debt factoring solution, we can check your debtors’ credit ratings to help you avoid bad debts.
ScotPac Invoice Finance
Invoice Finance is a flexible finance solution to help small businesses take back control of their cash flow. We can help you to release the capital you have tied up with a tailored Invoice Finance solution. You can receive funding within 24 hours and grow your business with the reassurance of predictable cash flow.