In this guide, we’ll cover everything you need to know about Invoice Discounting — What is it? How does it work? How much does it cost? And what sort of businesses are most likely to benefit?
It’s no secret that businesses need cash to meet their expenses, and invest in growth. Indeed, cash flow is often described as a company’s fuel, and – just as a car can’t run without fuel – businesses can’t exist without sufficient working capital.
Even in high-performing businesses, cash can become ‘trapped.’ You can be firing on all cylinders when it comes to sales but if your customers are taking an age to pay – or, indeed, not paying at all – you can soon find yourself in a sticky situation. Whilst most companies have bank lines in place to support their working capital needs, many overlook the reserves already tied up in their own balance sheets.
The irony is that offering credit terms to customers is pretty much a necessity for growing businesses – a fundamental strategy for customer acquisition and retention. But offering these terms, by definition, locks up cash in the form of accounts receivable – cash which then isn’t available to meet your supplier obligations and invest in business
This situation can, at best, inhibit growth – and, at worst bring a business to its knees. Yet it remains a common predicament for businesses from startups through to large enterprises.
It’s commonly accepted that, relative to sales, working capital performance has stagnated over the last five years – despite the financial upturn. Indeed, many companies are so preoccupied with being able to meet short-term expenses that investment in growth has become a distant second priority.
If this situation sounds familiar, then INVOICE DISCOUNTING might be one solution for you to consider. It can help ring-fence the impact of late customer payment, improve working capital and facilitate investment in growth – helping to take your business to new levels.