Invoice finance  - bridging cash flow

In today’s fast paced, highly competitive business world, it gets tough for SMEs to keep up with the speed of the ever-changing digital world, and to stay relevant in their industry, they need to be on a level playing field with competitors.

SMEs can no longer afford to trade with customers that demand extended payment terms because of daily operating expenses such as staff, overheads and inventory, and VAT would become due on income which had not yet been received. Business owners would as a result suffer from banks not wanting to provide finance to bridge the cash flow gaps. Elements that influence long payment terms include price, quality, size of the supplier, type of product, service and volume.

It started off with one firm implementing an extended payment term between itself and their suppliers, to around 120 days. The supplier would deliver their goods or service to the firm and have to wait lengthy periods for their invoices to be paid. This pattern then became a benchmark for all companies to follow in line and adopt the same approach.

In the past, extended payment terms between a business and its customers was a sign that the business was experiencing serious cash flow problems, but these days it is seen as quite the norm to expect a payment cycle of up to four months. Robust companies suggest that they impose these payment terms on suppliers as a form of business strategy. A large number of the world’s largest manufacturing, distributor, food and packaged goods companies are asking their suppliers to give them as much as four months to pay their bills — even though they typically require payment from their own customers in 30 days.

The importance of customer relations with invoice financing

As a result of extended payment terms, SMEs may seek external funding to bridge their cash flow crunches. Invoice financing is a source that has increasingly become widespread and popular amongst business owners because of the speed in which cash can be advanced against invoices and the less restrictive barriers that come with traditional bank loans. At fintech-based Populous World, entrepreneurs are able to list their invoices onto the technology backed global platform, where an auction of invoices takes place allowing invoice sellers to receive the best competitive rates. The platform offers a financing method termed ‘invoice discounting’ in which a company could get as much as 90 per cent of what the invoices are worth. The company then collects the payment from customers and then pays it back to Populous World.

Although invoice financing is an effective solution for businesses seeking to source finance, it does not just simply unlock funds and leave the SMEs behind. Companies such as Populous World endeavours to help business owners leap onto a stepping stone to grow and nurture their existing company. SMEs that list their invoices with Populous World are taken through a full tailor-made service, where the on-boarding process is carried out swiftly and on-hand support is offered throughout the duration of the short-term funding required, and is flexible to the terms that suit your business.

Alex Oritogun, Head of Business Development and a funding specialist at Populous World, expresses his enthusiasm towards customer deliverance, “we at Populous World are customer obsessed, and we want to constantly improve and create a platform that business owners love and trust. Ensuring customer satisfaction is our priority”.

Does invoice discounting make sense for your business?

Invoice discounting is a tool used across markets, niches, and industries. Almost each and every industry today is benefiting from alternative funding to advance cash and boost cash flow and working capital to improve business operations and optimise growth.

By way of an example, lets say you have a manufacturing based business and you have multiple vendors to whom you have already delivered products or services to. The invoices that are generated have a payment term of 60 days until they get paid. But instead of waiting for 60 long days or possibly more for the locked funds to credit into your bank account, you can partner with an invoice financing provider to advance instant funding against your outstanding invoices. The cash acquired from them can then be used for maintaining an effective cash flow life cycle.

Bridging your business’s cash flow gap is something that we at Populous World excel in delivering, providing you with the funding tools to grow your business and make a global impact. To speak to one of our team, contact [email protected]