Keep Your Cash Flowing – How To Use Invoice Financing To Improve Cash Flow

March 9th, 2011 |

If all of your suppliers gave you 30 days to pay, would you use every single one of those days, essentially using up all of the time allotted to make your payment? How about 60 days? 90? You can be absolutely certain that the vast majority of your debtors would. Unfortunately, this liberty can have a detrimental impact on your cash flow. Worst case scenario, your business could get into a situation where the time between paying your creditors and being paid by your debtors simply does not tally meaning that your ability to trade is dramatically impeded. Dealing with cash flow is a major factor for any business, large or small, and by taking control of it you will not only avoid putting your business in a very precarious situation but you will empower your business’ ability to trade efficiently and effectively by making sure time and money are both on your side.

Many businesses cower at the mention of cash flow; however quite on the contrary, controlling your cash flow can be more manageable than you may think. As you would expect, it involves a combination of discipline, endeavour and resilience to make sure every aspect is delivered and controlled consistently. Managing this task can begin with the age-old art of conversation. Simply talking to your customers and suppliers, with the appropriate levels of friendliness or force, to explain that their time to pay has arrived, or that you yourself require a larger credit account limit or more time to pay will prove invaluable to any business. This basic level of communication with debtors and creditors will improve a business’ cash flow almost instantly.

In those cases where this approach is not an option, or when every approach of this nature has been explored, Invoice Financing provides an attractive and immediate resolution to your cash flow problems by freeing up capital from your debtors that would typically be unavailable to you. By working with Invoice Financing specialists you are given the option to borrow money against your outstanding invoices. This approach to improving cash flow is a very real and reliable option that allows businesses to enhance their liquidity.

We have seen a tremendous shift in the demand for Invoice Financing recently. One of our more recent clients, a facilities management company, came to us seeking a working capital solution when his clients began to request more time to pay. By implementing an effective Invoice Finance facility, this company has been able to ensure they have remained supplied with the tools they need to enable them to service their clients with continuity – a picture that could have been painted entirely differently if the client had not acted as he did to correct his cash flow problems, before they snowballed out of control.

When it comes to managing your business’ cash flow issues, time is of the essence; it is fundamental that you have a suitable contingency plan in place ready to combat any potential cash flow problems that will inevitably arise in the future. If your business is one of the many that are experiencing cash flow problems then you need to act immediately and give your business the best chance possible to trade efficiently. If you are one of the lucky few businesses that do not have these issues then it is equally as vital that you consider what the future may hold. Make sure you are prepared to take advantage of the opportunities that present themselves and have strong control over your cash flow to ensure you avoid the potential threats. Look at prioritising your payments and be sure to have a suitable credit control system in place to guarantee your debtors pay on time. If your customers aren’t paying on time then stricter terms may be needed and if you think your suppliers could offer you a better deal then why not ask them for one? Taking control of both your debtors and your creditors, is a proven way of staying in control of your cash, so that your cash isn’t in control of you.

About the Author

Gulf Finance is an ambitious, progressive finance company licensed and regulated by the UAE Central Bank. We operate in the commercial and consumer markets, offering a variety of straightforward lending and deposit based products including Invoice Financing products and services.