Basic Accounting

Give your cash flow a helping hand with Invoice Discounting or Factoring!

For most business managing the cash flow is a full time job. Invoicing customers and clients is usually very time consuming and chasing payment can be very hard work.

When working on a separate set of payment terms to those of your customers, your services may not be paid for as long as up to 90 days. These terms don’t necessarily complement the way you are trying to run your business. You may need to make important purchases and expenditures, the kind that will help your business grow and improve. But without the finance from your customers you cannot afford to do so.

There are solutions available. One route is to look at increasing the overdraft of your business account. This gives you instant access to money you may need for immediate purchases. The overdraft charges may prove too costly however, causing you further financial worry.

Taking out a loan is another option, which provides you with money to cover those essential expenditures. This will cover you in the short term, but is not convenient on a month by month basis. Many businesses find their finances fluctuate monthly, and to be taking out regular loans would prove complicated in administration and repayment. This time consuming process would detract attention away from time and effort that could going into helping your business grow.

One option that may prove to be the most effective is invoice discounting. Invoice discounting is a model of borrowing that instantly releases the cash tied up in your sales ledger. You will pay a monthly fee to the invoice discounter and also pay interest on the net amount advanced. This is in addition to advances received or money repaid. With invoice discounting, as soon as an authorised invoice is issued by your company you can draw down up to the agreed percentage straight away, which frees up your cash flow and allows you to get on with growing you business. Once your customer pays the invoice reconciliation can take place. With Invoice Discounting you retain control over your sales ledger, which means that also retain responsibility for chasing payments.

If you are looking for a cash flow solution that will free up more of your time from administration of your sales ledger, then the best solution may be factoring.

Much like invoice discounting, factoring involves delegating your accounts to a third party provider to free finance bound to your sales ledger. But, unlike invoice discounting, this form of credit management allows you to receive up to 90% of your invoices value, with the power to lower this amount as your finances fluctuate. Also, the provider is responsible for following up payments on your behalf which can save both administration and staff costs. Also, because this is a larger company than you, they can often get settlement of invoices quicker than you might on your own.

This model is increasingly popular for those who wish to put less time into administrative aspects and focus more on the growth and expansion of the company.

Martingales are a company able to offer cash flow and credit management solutions. To find out more about how Martingales can help your businesses cash flow, visit http://www.martingales.org

For more information please contact:

Martingales Business Finance

T: +44 (0)1202 591602

E: enquiries@martingales.org

Or visit our website at www.martingales.org.uk

Martingales

The Park House

75 Parkstone Road

Poole

BH15 2NZ

Peter Rufus
Commercial Director
Martingales
www.martingales.org.uk

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