Invoice finance is a business funding tool that could be used by literally any kind of company. It is not limited to certain industries. That being said, it has been our experience that some industries use it more frequently than others. Why? Perhaps it is the nature of what they do. This post will discuss a few examples that illustrate what businesses can benefit the most from invoice finance.
As you read, bear in mind that a considerable number of invoice finance users are business-to-business (B2B) rather than business-to-consumer (B2C) operations. The explanation is simple enough. B2C is pretty much retail. Retail customers pay with cash, check, or credit card anyway, so invoices are less common. With that said, let us move on to the promised examples.
1. Temporary Staffing
Temporary staffing is one of the more unique industries that takes advantage of invoice finance. It’s unique in the sense that its product is human labor. If you know anything about the cost of running a business, you know that labor is almost always the highest cost a business faces. It is just expensive to hire and maintain a workforce.
The temporary staffing industry supplies workers on a contract basis. As the legal employers of the workers that they send to other sites, they are legally responsible for paying those workers and handling taxes and other payroll deductions. Here’s the thing: workers need to be paid on a regular schedule regardless of how frequently a staffing agency’s customers pay their invoices.
You might have a staffing company that issues invoices with 30-day terms. Meanwhile, the workers they supply on contract get paid every two weeks. If some of the agency’s customers are slow to pay invoices, cash flow could become a problem.
2. Wholesale and Distribution
Next up, companies involved in wholesale and distribution are very susceptible to tying up large amounts of cash between shipments. They can spend a lot of money getting products to their customers; more money than just the actual cost of the products themselves. It is not unusual for wholesalers and distributors to turn to invoice finance to maintain a more stable cash follow.
Manufacturers are in a similar position. They spend quite a bit of money to manufacture the products they sell to the wholesale market. Yet they also need to pay their suppliers for raw materials, parts, etc. Trying to manage both ends of the supply chain can be tricky, especially when consumers are not buying as much as they used to. Invoice finance can help manufacturers satisfy the financial demands of the incoming supply chain while they wait to be paid from the outgoing side.
4. Professional Services
Providers of professional services need to be incredibly careful about how they manage invoices They have to be. They are dealing with a specific type of clientele that often needs to be treated with kid gloves. When cash flow becomes a problem, many of these professionals turn to invoice finance as a short-term solution.
Although professional service providers may not have the overhead that manufacturers, wholesalers, and distributors have, they do tend to have a sufficient volume of cash expenditures. They need to spend money to provide professional services. When the money runs low, invoice finance can be the solution.
Many other industries use invoice finance on a regular basis. They range from food and beverage to apparel and janitorial services. Regardless of the industry your company is involved in, feel free to contact us to learn more about how you can benefit from invoice finance to meet your short-term funding needs. It could be the perfect solution for you.