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What Should You Do When Considering Invoice Finance?

Considering invoice finance

Considering invoice finance for any business should take a substantial amount of evaluation as to the best solution for your business, or if invoice finance is even right for your business. It is not a decision to take lightly as this will ultimately affect the cash flow of your business, so you need to be sure that whatever you decide will positively impacts your business rather than negatively.

Factoring vs Confidential invoice finance

Although they serve the same purpose, to finance your invoices prior to your customer making payment, factoring and confidential invoice finance are quite different and often have different results. In brief, factoring is a disclosed service, so your customers know you have invoice finance and the finance company  will chase for payment on your behalf, and with confidential invoice finance, it is an undisclosed form of finance so your customers don’t know you have invoice finance in place and  you are in charge of carrying out invoice collections, therefore keeping the important relationship with your customers.

In my opinion CID is a much more effective option as from my experience factoring companies are not as effective at chasing whilst maintaining positive customer relationships. Also factoring costs more than a CID facility.  There are, however, certain caveats on confidential invoice finance; businesses often need a minimum of £500k turnover, a projected £500k or high growth projections, low debtor days and a clean ledger (little or no misallocations and disputed invoices under control) to be considered.

Picking the right invoice finance option for your business

There are many invoice finance suppliers out there, it can become an overwhelming task to scour through them all to find the right deal for you, but this is a task that is essential to the success of your invoice finance facility for your business.

What to prepare when considering invoice finance?

Particularly confidential invoice financing you need to ensure that your credit management processes and procedures are completely up to scratch to demonstrate to the finance supplier that you will effectively chase for payment of invoices. This will include, ensuring your T&Cs are adequate and made known to customers, having the right leverage in place to encourage payment from customers, having a detailed collection strategy and knowing the correct escalation process when payment is not forthcoming.

Considering invoice financing for your business is not a decision to be made on a whim, it needs to be carefully thought out, researched and implemented in the most appropriate way to ensure the success of your business’ cash flow.

At CMG UK using our considerable experience in the invoice finance area, we help business find the facility that is the best fit for their business.  Also, with our proven track record for outsourced collections, invoice finance providers find reduced risk knowing a specialist firm is conducting day to day collections. For more details of our services, please email, call 03332 413 203.