Invoice discounting has a reputation of being for businesses that are facing cash flow problems. As well as being a perfect solution to slow-paying customers and shortage of capital, it is also a legitimate way to finance the growth of your business. Here we’ve explored the ways that invoice discounting could help your business if used in the right way.
What is Invoice Discounting?
Invoice discounting gives you immediate access to the cash you’re owed in your invoices. It means that you will no longer have to wait 30+ days for the customer to pay you, and your customers will never know about it. Businesses like Touch Financial will help find you such a service as well as providing information on a range of other types of invoice finance too, but how can such services aid your business?
Up to 90% of your unpaid invoice can be turned into cash almost instantly, which you can use as an injection of capital into any area of your business. It gives you confidence that you’ll receive the cash at a certain time, which not only helps you out from a cash flow perspective, but it means that you can plan the way that you’ll use it too.
Speedy Payments to your Suppliers
Because you’ll have the money owed instantly, it means that you can pay anything you owe too. This means that your reputation for paying promptly will improve within your supplier network. You will have more people and companies wanting to work with you, and your business will grow exponentially.
It will also give you both the time and the power to negotiate better deals with your suppliers, and/or take advantage of new business opportunities, thus improving your profit margins.
Managing Your Sales Ledger
This form of finance means that you’ll never outgrow your available cash, which means that there is no need to worry about spending more than you have. It is a line of credit that will automatically increase as your sales increase, with no need to renegotiate like you would have to with a bank overdraft.
Unlike invoice factoring, with invoice discounting, you have complete control of the sales ledger, so your customers don’t have to know that you’re using it.
Overall, the main benefit of invoice discounting is that it allows instant access to your earned money instantly. This allows you to keep your cash flowing in and out of your business without any potential hold up to business procedures.