Published on July 18th, 2014 | by admin


Cash Flow Is An Important Factor For Any SME To Consider

For any fledgling business, cash flow will be one of the key issues that needs addressing in order to grow and prosper. Indeed cash flow has often been described as the oxygen of small businesses with delays in receiving payment often cited as a major reason for failure.

Enabling an SME to get their hands on cash upfront for unpaid invoices instead of relying on a customer to eventually pay a bill, perhaps weeks or even months later, invoice factoring involves selling invoices to a third party who then advance the money.

Invoice factoring has often traditionally been perceived as cost prohibitive and inflexible, however here at the Post Office Shop we’ve learnt that this avenue of addressing cash flow shortages might be more feasible than first thought.

Indeed, in an economic climate where banks have restricted lending criteria on loans and overdrafts, plus equity funding in short supply, using an invoice factoring provider recognised by The Asset Based Finance Association is increasingly an option for consideration.

As well as instantly addressing cash shortfalls, invoice factoring companies also process the invoice on behalf of an SME freeing some of their time taken in handling their cash books. It is even possible to undertake invoice factoring for only a selected number of invoices meaning the money received upfront will only be related to certain invoices.

Before deciding that invoice factoring is indeed definitely the preferred route to address cash flow shortages, it is important for an SME to understand that in some instances restrictive terms still apply though these are often less prohibitive than they were in the past.

So faced with a widespread scenario of debtors paying late leading to a loss of revenue, it appears invoice factoring may be one viable solution to alleviate one of the major headaches SMEs are often faced with – as long as they have an annual turnover of at least £50,000.

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