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If You’re Struggling to Collect Invoices, You’re Not Alone

If You're Struggling to Collect Invoices, You're Not Alone

A need to better manage cash flow is one of the main driving forces that encourage business owners to delve into the world of invoice factoring. Also known as invoice finance, factoring gives businesses quick access to cash for meeting short-term needs. So if cash flow is a problem at any given time, and you’re struggling to collect invoices, factoring can help.

You might be surprised to learn that cash flow challenges are a global problem. In fact, recent numbers seem to suggest that more companies than ever before are facing cash flow problems because they are struggling to collect invoices on time.

Let’s face it. Every business has that core group of late payers whose inability to pay on time negatively impacts cash flow. But in recent years, things seem to have gotten a bit worse. Maybe it’s due to the recession. Perhaps it’s something else entirely. Either way, late payers create problems for businesses.

Late Payers and Negative Cash Flow

Having too many late payers creates all sorts of problems. A big one is negative cash flow. When a business isn’t taking in as much revenue as its spending on day-to-day operations, things get dicey.

According to a recent report put together by Accenture, 90% of Kiwi businesses deal with at least one negative cash flow month annually. That is a pretty substantial number. But it gets worse. Some 25% are in a negative cash flow position more often than a positive position, measured on a yearly basis. That means more months out of the year are cash negative than cash positive.

A leading factor here are those late payers. Approximately 45% of the invoices the Accenture report accounted for in 2021 were paid late. Furthermore, 8% were paid more than a month late.

Think of that in relation to your own business. If your normal terms are 30 days and 8% of your invoices are paid more than a month late, that means you are waiting more than 60 days for some of your customers to settle up.

Invoice Finance Can Help

Collecting from late payers can be a full-time job all by itself. Fortunately, there are things businesses can do to protect themselves against chronic late payers. In the interim, invoice finance can be a tremendous help. It is a form of financing that leverages outstanding invoices to raise cash quickly.

If you have never looked into invoice finance before, the principle is fairly simple. You sell a group of outstanding invoices to a factoring company for a modest fee. You get a certain percentage of the outstanding invoices upfront, in cash, and the remaining amount once the invoices have been paid.

Should you choose to use invoice finance to better manage your company’s cash flow, we would be glad to work with you. We would also recommend looking at implementing a few strategic policies:

  • Shorter terms on all future invoices
  • Immediate collection efforts on invoice due dates
  • Not extending further credit until late invoices are paid.

There comes a time when persistently late payers have to be strongly encouraged to get on track. Yes, that can make a small business owner feel like the bad guy. But that same owner cannot afford to give away the store.

If your company experiences cash flow management problems from time to time, know that you are not alone. It is a common problem for most businesses. But it’s also a problem that can be better managed through resources like invoice finance. To learn more about invoice finance through Thales Financial, contact us at your earliest convenience. We are always ready to help.