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Managing cash flow can be a major headache for businesses. On the one hand suppliers are asking for payment, and on the other customers owe money. How much easier it would be if customers paid up more quickly.

Finding ways to improve cash flow is a major challenge for many organisations. That’s where accounts receivables factoring has an important part to play. It releases the majority of the cash tied up in unpaid sales invoices, allowing the wheels of business to turn more easily.

Improved cash flow is the biggest impact that factoring accounts receivable will have on your business. Factoring releases the money in your sales ledger, making it available to your business before your customers settle their invoices.

In very simple terms, if your business has £100,000 in unpaid invoices, you could release between 80% and 95% of the outstanding debt. That’s a cash inflow of up to £95,000 – massively beneficial to a business that’s facing cash flow challenges.

An accounts receivable factoring company can help you convert your unpaid invoices into cash. This puts money in your bank and improves your cash flow.

An additional benefit of account receivable factoring is that your sales ledger management, credit control and payment collection processes can be managed by the lender. Removing the burden of having to chase payments etc.

Receivable factoring is all about releasing the cash that’s tied up in unpaid invoices.  At any point in time a business can easily have up to three months of sales invoices unpaid – that’s 25% of annual turnover.

Having that much cash imprisoned in your sales ledger can cause serious problems.  Every business has suppliers to pay, payrolls to run and other financial commitments. Lack of cash can also stifle investment and business development, because there’s no money to invest in new products and services.

A commercial mortgage agreement will typically consist of a number of different fees and associated costs. Naturally, the level of these fees will vary depending on your lender and the repayment options you choose. However the type of fees and costs associated with a commercial mortgage remain much the same, as outlined below:

A commercial mortgage is a significant investment for any business. That’s why we believe in making sure our customers fully understand the potential advantages and disadvantages before they enter into any agreement with a lender.

Our experienced consultants have pulled together a list of potential pitfalls, so familiarise yourself with these and bear them in mind whilst considering a commercial mortgage:

Minimum level for the loan
This is the minimum threshold or amount a commercial mortgage will lend to you. Commercial mortgages are not typically available for loans of less than £20,0000, where alternative funding solutions, for example a personal loan, may be more affordable.

Period of grace
Under certain circumstances some lenders may be flexible regarding late or delayed repayments. It may be possible to negotiate with your lender a payment holiday or lower repayments for an agreed period.

Personal guarantee

Invoice Factoring is a way of giving your business the funding needed to trade, based on your sales rather than your balance sheet.

Invoice Factoring helps you to maintain a healthy commercial relationship with your customers. By outsourcing the credit management function to a factoring company, you can provide your service or product without the uncertainty of wondering if your new customer will be able to meet your payment terms.

Invoice Discounting is a similar service to Invoice Factoring, in that it gives you cash advances up-front based on your invoices. However it is aimed more towards larger established businesses, as it allows them to keep control of their sales ledger while still benefiting from increasing their working capital.

The invoice discounting company does not disclose to your customers that you are using the service, allowing you to keep greater control of your client relationships. The service can also be linked to lending against other assets, such as stock, machinery and property.

Invoice Finance is used by around 46,000 businesses in the UK.

The types of business that best fit the invoice factoring and invoice discounting model are those which provide services or goods to other businesses and which need a steady cash flow in order to pay everyday costs such as staff and overheads.

Here are just a few of the types of business that have already grown using invoice finance:

Anne Lloyd was working for a large, Bristol based nursing recruitment agency when she first thought about setting up on her own. Though earning a good minimum salary of £30k pa, she was constantly aware of the rewards that running her own agency would offer.

Like many entrepreneurs Anne had no experience of payroll or accounting and the success of the business rested on her selling ability and contacts. Her agency supplies nurses and auxiliaries to NHS Trust hospitals and to care homes, and she estimated that they would pay her within an average of 45 days.

BEC Local Manufacturing is a manufacturing company that supplies specialist fixings to the plumbing industry. Their customers include a major buying group and a number of builder’s merchants.

Steve, the managing director, started the business in his garage 11 years ago and grew it to a £1.5m turnover through retained earnings. His accountant was constantly concerned at the level of capital expenditure required to meet demand.

Unlike a business overdraft, invoice finance funding is based on the invoices you raise. As such, invoice finance (invoice factoring or invoice discounting) will grow with your business, without the need to go back to your bank to renegotiate your overdraft.

Invoice finance is thus a flexible and innovative alternative to more traditional funding methods, reflecting your company’s current position and not basing a decision on how it has performed in the past.

Touch Financial is the UK’s leading Invoice Finance broker. We exist to help you find the right facility for your business. Our independent advisors have many years of industry experience from both sales and client management perspectives.

As such, we know the likely pitfalls and SMALL PRINT better than most!

The following section highlights a number of things to watch out for when considering invoice finance – invoice factoring and invoice discounting.

The following section details terms which are commonly associated with invoice finance.

If you are looking for a specific term, click one of the following links to go to the relevant section:

A – C | D – F | G – M | N – R | S – Z

The following section details terms which are commonly associated with invoice finance.

If you are looking for a specific term, click one of the following links to go to the relevant section:

A – C |   D – F |   G – M |   N – R |   S – Z

The following section details terms which are commonly associated with invoice finance.

If you are looking for a specific term, click one of the following links to go to the relevant section:

A – C | D – F | G – M | N – R | S – Z

The following section details terms which are commonly associated with invoice finance.

If you are looking for a specific term, click one of the following links to go to the relevant section:

A – C |   D – F |   G – M |   N – R |   S – Z

The following section details terms which are commonly associated with invoice finance.

If you are looking for a specific term, click one of the following links to go to the relevant section:

A – C |   D – F |   G – M |   N – R |   S – Z

Invoice factoring is an outsourcing solution that allows businesses to improve cash flow by converting unpaid invoices sitting on the balance sheet in to money in the bank.