The timing of cash flow can be all important in making or breaking a business.
Ideally, money made from trading would come in before, for example, a major bill had to be paid or tax was due. It would be ideal, say, if the money you have earned was paid before your staff need to be paid.
As a business owner, you always have to have one eye on whether or not you have a shortfall of funds - the old adage 'sales is vanity, profit is sanity, but cash is reality' certainly comes to mind! If you have a shortfall, it is known as a cash flow gap (see our comprehensive invoice discounting glossary for more definitions).
A cash flow gap can widen around the end of the month, especially when wages need to be paid, whilst invoices issued to debtors from the same period may not be paid into the business for 30, 60 or even 90 days.
A cash flow gap could also increase due to:
- Suppliers tightening credit terms
- Customers going bankrupt
- Insufficient bank facilities available
- Poor credit control
- Not forecasting ahead
So, as long as your business is offering credit terms, the potential for a cash flow gap to appear will always be there. But there are ways to plug a cash flow gap.
Invoice Discounting is one way that can help ensure a fluid cash flow within your business.
Can Invoice Discounting really help?
Invoice Discounting is a popular alternative to factoring, which should be considered by companies that already have an experienced credit management team:
- We give you cash against your invoices immediately. This could be up to 90% of the value of your invoices, released upfront to your business
- You remain in control of the sales ledger and the collections
- Payment will be made by you or your customers into a trust account we set up
Types of Invoice Discounting
Invoice Discounting can be disclosed or confidential, also known as Disclosed Invoice Discounting (DID) or Confidential Invoice Discounting (CID).
With DID, your customers are made aware of our involvement, usually through a 'notice of assignment' which is printed on copies of all invoices. All payments are made addressed to Skipton Business Finance.
With CID, customers have no awareness of our involvement and you continue to invoice and collect payments into a trust account.
What are the other benefits of Invoice Discounting?
- The facility keeps pace with the growth of a business
- If you already have a well established credit management team, then you can still utilise this strength whilst benefiting from the extra cash released from invoice discounting
- You can receive funds within 24 hours
- It is very well priced against traditional business loans and overdrafts
- It allows you know when funds are going into your bank account, rather than the uncertainty of when invoices will be paid
- You don’t have to secure a loan against any other assets meaning more flexibility for your business
- At Skipton Business finance, you will have a dedicated Relationship Manager throughout the lifetime of your facility. That means no automated telephone services and no call centers. Just the direct contact details of a highly-trained and efficient Relationship Manager
As of 2010, cash funded through invoice discounting was almost £180 billion and the manufacturing industry accounted for a large number of clients using this flexible facility.
Get in touch with us!
It’s easy to unlock the money you have tied up in unpaid invoices. Just call us on 0845 602 9354 and one of our award-winning team will be able to guide you through the process.
