In business, maintaining a healthy cashflow can be as challenging as it is crucial. This is where invoice finance facilities come into play, offering a lifeline to companies struggling with delayed payments. But like any financial tool, it's not just about having access—it's about using it wisely. Let's dive into some essential dos for making the most of your invoice finance facility.
Research and Choose the Right Provider
Not all invoice finance providers are the same.
Pro Tip: Compare at least three different providers, focusing not just on rates but also on their reputation and the quality of their customer service.
Maintain Accurate and Up-to-Date Invoicing
Invoice finance works best when your invoices are accurate and up-to-date. Ensure all client details, amounts, and terms are clearly stated to avoid delays or issues with the financier.
Tool Recommendation: Check out invoicing software to streamline your process to ease potential delays in funding.
Understand the Fees and Terms Clearly
Invoice financing can have various fees, such as service fees or interest on advanced payments. Review and understand these terms fully to avoid unexpected costs. Clarify any ambiguous terms with the provider.
Anecdote: A business owner once overlooked a clause about seasonal adjustments in her agreement. This led to unexpected changes in her available funding during peak season. After a thorough review with her provider, she negotiated more suitable terms, ensuring stable financing year-round.
Build Good Relationships with Customers
Since invoice finance arrangements involve the financier contacting your customers, it’s important to maintain good relationships. Inform clients upfront about using invoice financing to avoid misunderstandings.
Pro Tip: Set up a meeting with your key clients to explain your invoice finance arrangement and how it benefits both parties through more predictable cash flow.
Diversify your client base
While it's great to have big clients, relying too heavily on a single customer can be risky for your invoice finance facility.
Pro Tip: Aim to have no single client represent more than 20-30% of your total invoices. This diversification can make your invoice finance facility more stable
Communicate with your financier.
Your invoice finance provider can be a valuable partner in your business growth—if you keep the lines of communication open.
Action Item: Schedule quarterly reviews with your finance provider to discuss your business performance and any upcoming changes or challenges.