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Making Late Payments a Thing of the Past
Giving your much valued customers a credit facility seems on the surface to be prudent thing to do. Giving them that extra bit of time can lead to valued relationships and trust which can secure on-going custom. The process appears to be simple; finish a task, invoice the client and 30 days later you will be in receipt of the funds. Unfortunately, it doesn’t always pan out that way and the stretching out of payment terms can adversely affect your company’s cash flow and use up valuable resource when you have to spend time chasing invoices. How can these issues be avoided as the double dip recession continues to take hold?
Retain Control of Company Finances
It is a widely acknowledged that the chasing of late payments is one of the most common challenges facings SME’s these days. In fact, the British Chamber of Commerce has recently published research that suggests one in four payments are made late, giving businesses of all sorts of headaches.
There are ways that businesses can take action to avoid these late payments. To start with, it is fundamental that businesses get to know their customers at the outset of the relationship – this way the likelihood of missed deadlines can be dramatically reduced. Payment terms can be established beyond any doubt as they are laid down at the outset of the business relationship.
As Jo Brookes from Compare Factoring Assist says “making sure your terms and conditions of sale are watertight couldn’t be more important”
“That way, the customer and client are both clear from the start. Clear communication will stop any cash flow problems from occurring” she continued.
Perhaps the vital thing to ensure is that these terms and conditions are thoroughly thought out and checked. This way, if payments are late, the customer will not have a leg to stand on and will be forced to pay their invoices in good time.
In a perfect world, companies would never have to resort to legal means in order to get their payments in but this is sometimes the case. Prevention is always better than the cure but every business needs to have a contingency plan in case things get a bit messy.
If it is becoming evident that this is the road a company is going down then it is prudent for them to take expert advice from an expert such as a lawyer or an accountant. There are also B2B debt collection agencies available for balances which are less than £5,000.
Sustain Positive Cashflow
A popular way for businesses to keep the cash flow moving in a positive manner is through invoice finance or factoring. This means that working capital can be achieved in advance of debtors paying actual invoices and a trustworthy credit control service is also created. This system can also be tailored to meet businesses of all sizes and type.
“The involvement of a third party in the process can help to balance the books greatly. It can create greater flexibility and a super effective method for managing your businesses cash flow” Jo added.
Invoice Discounting or Factoring?
The two ways of going about this invoice finance is through either factoring or discounting. Both involve roughly 90% of the cash being released to the business immediately and the balance is then paid when the client processes their payment. Whatever service charge the factoring company charge is then deducted from the final 10%.
Factoring is more suitable for start-ups and businesses who invoice in arrears or using credit terms. The provider will then manage the outstanding balance on behalf of the company in question.
Invoice discounting on the other hand, is definitely better for the more established firms – usually those than turnover £250,000 pet year or more. The company stays in control of the outstanding invoices but the sales ledger information is passed on to the provider. The process remains totally confidential and is often preferred as the business can keep complete control of the relationships.
For more information regarding any aspect of dealing with late payment, why not visit www.comparefactoring.net. Their team of specialists can help with a wide range of invoice factoring needs.
The Christmas period is traditionally a booming time for most retailers however it is generally the time when many businesses in sectors such as manufacturing or services struggle to pay wages and bills.
As many businesses close down over Christmas and New Year the invoice collection cycle slows down. Fixed costs such as wages, rent, rates and VAT still need to be paid and many companies don’t have the finances to meet their commitments.
With many businesses becoming insolvent in January and February it is really important that you manage your cashflow now to avoid this. Factoring is the most popular form of Invoice Finance in the UK and is one way to ensure a healthy flow of cash within your business.
You can release up to 90% of the value of your invoices in cash almost immediately and avoid having to wait 30, 60 and sometimes up to 90 days for payment.
It’s really important to act now and not wait until next year when you are struggling. Take a look at our invoice finance and cashflow solutions, we can get you the best deals and most competitive rates on the market.
All our advice is completely free with no obligation so if you’d like to speak to one of our advisors CLICK HERE NOW for an instant call back.
With their vital role in the UK’s economy on shaky ground as more and more small and medium sized enterprises are turned down for much needed bank funding, services such as asset based financing are coming into their own.
According to the Asset Based Finance Association (ABFA), firms using these financial services in the UK and Ireland rose by 4% in the second half of 2012 with the most recent figures showing that 43,000 businesses turned to ‘asset based finance’ in Q2 this year while the total amount lent to companies in the same period of 2011 was up 2% in 2012, at £16 billion.
SME’s confidence has taken a knock after 42% of funding requests were disallowed up to and including Q3 in 2012, and it seems that despite funding available from invoice factoring and discounting, companies are still reluctant to take full advantage thus far. But with over 1000 new small businesses using the service as a way to inject working capital into the company when compared to the same period in 2011, it looks like it is slowly becoming seen as an economically significant funding option.
The annual growth rate of the invoice finance market since 2009 has been over 10 percent year on year, demonstrating that it has stepped up to fill the gap left by the decrease in traditional bank funding. Phillip Kearle, Chief Executive Officer of Demica, who organised the research on invoice financing and its uses, says: “Our report has demonstrated [invoice factoring’s] economic significance in Europe [and that it is] playing a vital role in funding the economic recovery…in a world of suppressed liquidity, [because] corporate health hinges on the availability of working capital”.
It seems that choosing to use a lesser known funding option is not the only issue for the SME’s. Their reluctance to increase their debt still further is the other problem According to statistics taken from the 2012 Top 100 small and medium businesses in Yorkshire, two more firms have debts between £0 and £10m. Although overall the the businesses in the list have stayed fairly steady with 32 of the 49 firms in a position of net debt having a gearing of under 100% – the same figure from 2011. The main change is that 6% more firms with a requirement for working capital are using invoice financing since 2011 – in fact the top SME’s in the area are choosing not to get into more debt and are instead choosing to use their current assets to gain immediate funding.
Overall, with net bank lending to SMEs falling month on month under the current government schemes it is time for companies to explore these previously lesser known funding options to allow them to access products and services they need to increase their funding and working capital whilst decreasing their dependence on the banks.
In the latest news update from Target Business Assist we bring you news of a drop in consumer demand & refused credit that is leaving many small to medium enterprises struggling…
Half of the 2,600 businesses surveyed by the Federation of Small Businesses said that they would ideally like to expand over the next 12 months but with limited funding available, with banks rejecting over 40% of applied for loans, confidence is diminishing,and businesses are shutting down. Between the second and third quarter of 2012, credit refusals from banks went up from 40.6% to 42.4% and with 60% of the businesses claiming finance to be unaffordable, it is no wonder that SME growth is not building as it should.
To try to overcome this growing concern, Business Secretary Vince Cable, has outlined plans to create a state-backed ‘business-bank’, specifically for small businesses to get hold of the funds they need in an attempt to stimulate growth and rebuild the UK’s entrepreneurial spirit and confidence.
The National Chairman of the FSB has said: “It isn’t surprising that confidence fell back into negative territory as the recession entered its third quarter as growth flat-lined.“
If your organisation trades in the UK and overseas then Export Factoring is a financial solution that will allow your company to free up the cash that is tied up in both domestic and export invoices.
Export Factoring allows you to have up to 85% of the face value of your invoices released to you company within as little as 24 hours and will also allow your company to be protected from the ever changing currency exchange rates.
Compare Factoring can help you with any aspect of Invoice Finance both in the UK and overseas, for immediate assistance please call us on 0844 846 7475.
With the majority of high street banks refusing to assist phoenix businesses we have found many of our panel of invoice finance lenders are looking at helping them in a different, more positive perspective.
While it is appreciated that the down fall of many businesses are caused by immoral dealings and unscrupulous directors who deliberately fail to pay suppliers and “go bump” on purpose, the majority of companies failing into debt is caused by no fault of their own.
In these hard economic times a high proportion of failing businesses are simply caused by one of their major customers winding up and therefore not paying their invoices.
Many of the big banks steer away from assisting pheonixed businesses merely to protect their reputation with their existing customers.
That said, to move forward and help the economy out of its current slump, pre-packs and phoenixes are required in order to save employees jobs and livelihoods and move the economy forward so somebody has to lend to them.
In order to succeed, these businesses should be supported and given the opportunity to get back on track. Often they can work again with their main suppliers by pre-paying invoices or paying a higher rate for goods or services initially, however, they need the cash flow to do so.
If you are a phoenix business looking for invoice finance or advice, contact one of our business advisor’s who will give you free advice on how we can help you.
Invoice factoring businesses all across the United Kingdom have seized a large gap in the market that has been left open by banks over the last few years. Factoring businesses are now above to reduce their risk of lending to smaller firms, on top of this they have spotted a huge opportunity that allows them to increase the amount of money that they are lending over the last few months.
Over this summer a factoring company call Bibby Financial Services has been able to increase its available lending funds to businesses from £90,000,000 to and all time high of £340,000,000. A few days ago on Tuesday night there was an event held by Bibbly Financial Services at their heat office in Duke Street, this event was to promote the its new larger capacity to its customers. This firm has commented saying that they are only able to increase their lending funds because of a high rise in demand for an alternative financial facility than the high street banks for small and medium sized businesses.
Compare Factoring can help you get in contact with companies like Bibby Financial Services and assist you to find the right factoring company for you and your businesses needs. Compare Factoring is a well established business factoring comparison company. We allow you and your business to compare business factoring quotes and choosing the right solution for your business.
There are now 41,989 businesses all across the United Kingdom that are all using invoice factoring, this figure has grown 6% in just the first quarter of 2012. On top of this the funding that has been put in by Asset Based Finance Association (ABFA) has also raised by 4% over the past year achieving over £15.4 billion by March 2012.
This massive growth in the factoring market has come at a crucial time when many businesses are struggling to get any sort of access to finance from banks because of the recent recession. This takes away the option for small and medium business to capitalise on growth opportunities that are in some cases fatal to the businesses future. Factoring allows businesses to grow and increase their number of sales directly in line with the demand for invoice finance.
One of the former bankers from Bibby Financial Services has recent spoke to the press and said the following:
“Historically, the banks have been a little bit tick box, whereas Bibby will get to understand a business a lot better. We will also do single debtor finance. We also do a lot with international debtors arising from export sales. Banks are reluctant to cover 100% of invoices from America. They worry about getting their money back from other countries. We make sure the goods or services have been delivered and then we will fund the invoice. Banks don’t get as close to customers as we do. We are providing cash to customers that they wouldn’t otherwise be getting and also assisting with credit control.”
Bibby is one of the many invoice factoring companies that Compare Factoring can put you in touch with. The job of the factoring companies is to chase up late invoices on behalf of the businesses. They will monitor the outstanding balances that are owed by each one of the customers.
Compare Factoring can help you find the perfect invoice factoring company for your business. We have a large team of experience and friendly advisors that are always on hand to help you with any questions or queries.
Here at Compare Factoring we have already helped thousands of businesses across the United Kingdom find invoice factoring solutions to help them grow their business to a higher level. Since the credit crunch the amount of businesses we have helped has doubled showing the need for invoice factoring. We typically help any sort of business that has a turnover up to £10m and can find companies to factor invoices that range between £1,000 and £10million.
Compare Factoring is a UK based company and website that takes all of the intermediaries out of factoring and helps to link private investor’s directory with businesses that are looking for finance solutions.
The average invoice that is factored in the United Kingdom is around £50,000 but there have been some larger single invoices that have been factored up to £750,000. If you think that your business can benefit from invoice factoring then you should get in contact with us today on 0844 846 7475 or simply fill in the short form on this page.
Recently a small group of business directors that were pushing for regulation of their lenders that provided funding based on their company order books has said that it is likely to be more difficult than they first thought.
The founder of the Campaign for the Regulation of Asset Based Finance Brian Moor met with civil servants from the Department for Business and the Insolvency Service of the Treasury this week. Their aim was to push the case for some form of legislation for what now is one of the very few unregulated parts left in the financial services industry across the United Kingdom.
Brian Moor has claimed that there shall be an agreement that regulation would build much needed trust in the lenders. But he has recently also admitted to the Financial Times earlier in the week that things will not happen overnight and getting any sort of change in the law will take time.
Not everyone is in the same boat as Brian Moor though, the Financial Times spoke to Jonathon Gregory. He has helped many different businesses when they had been in difficulties and helped them to find factoring providers. This is what he had to say…
“There would be a few problems with regulation asset based finance as there is a huge amount of innovation that turns it all into an industry of small factoring companies. If costs come into place the smaller factoring companies will all fall into the hands of banks, the only companies that can afford to comply with the regulations!”
Gregory does agree with voluntary code that has also been proposed by the Asset Backed Finance Association (ABFA), the nation’s industry trade body. But he did make the point that it needs to be structured in a way where there was things put in place to make sure it was properly enforced across the industry.
There has been a massive rise in asset based finance since the banking crisis. This is because it’s an easier and more flexible way of sourcing working capital for the smaller business owners, rather than going to the bank for overdrafts and fixed term loans.
On the other hand there has been a huge amount of criticism around the lack of control on the fees for these changes. This is because some business owners have recently claimed to have forced their own businesses into administration in unnecessary circumstances.
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- Goodwill and losses should be financed by equity;
- Property should be financed by equity or long-term loans;
- Plant and equipment should be financed by asset finance over the useful life of the asset or equity;
- Stock should be financed by a combination trade creditors, trade finance and overdraft;
- Trade debtors or receivables should be financed overdraft/revolving credit facility or invoice factoring/discounting.
- Factoring provides cash-management with the sales ledger and collections being managed by the Lender. Therefore, the business gets the benefit of a credit control service from the factoring supplier. The business will get immediate cash injection against outstanding invoices keeping the cash flowing. The business’s customers pay the Lender directly and so are aware that invoice finance is being used.
- Similarly to factoring, confidential invoice discounting helps to release cash tied up in outstanding customer invoices without customers knowing that invoice finance is being used. Unlike invoice factoring, the business handles its own sales ledger and credit control.
First, it is useful to consider how, in an ideal world, businesses should be prudently financed.
The prudent way to finance a business is to match the type of funding to the assets being financed. For example:
The advantage of financing a business by matching type of funding to asset life is the avoidance of pressure from Lenders to repay loans when the business either expands rapidly or starts to make losses.
However, it is not often possible to follow this prudent formula, as funds are seldom available for the longer-term requirement such as equity and long-term loans. The owners then have to consider the use of short-term funds with loans subject to performance covenants and that are repayable on demand. Owners then need to understand and manage the risk of investing in assets financed by short-term loans that can be recalled on demand by the lender.
In years gone by, bankers were prepared to finance working capital (stock and debtors) with overdrafts supported by debentures granting them fixed charges over assets and, depending on the level of risk, further supported by directors’ personal guarantees.
The distinction between fixed and floating charges is of importance because holders of a fixed charge have priority over the preferential creditors but holders of a floating charge do not. Accordingly, upon the insolvency of a debtor, a fixed charge holder will be paid out before preferential creditors. In contrast, the proceeds of floating charge assets are subject to the costs of realisation, the expenses of a relevant insolvency procedure and the preferential creditors. Only after these costs have been deducted is the floating charge holder entitled to receive any remaining funds.
In 2005, the Lords ruled unanimously that a standard form debenture used by most banks and other lenders created only a floating and not a fixed charge over the book debts of the borrower. The banks and other lenders standard procedures needed to be reviewed as the security of a fixed charge over book debts was no longer available. Combined with the credit crunch of 2008, banks became unwilling to lend against book debts with out other means of security.
One of the consequences of this House of Lords decision is that it makes factoring as a means of financing a business increasingly attractive to financial institutions, as it avoids the problem of how to take an effective charge over the book debts. Instead the Lender simply takes an assignment of the debts.
Therefore, debt factoring and discounting has increased in popularity as a way for lenders to fund book debts whilst retaining security over those assets. This method of finance also fits the ‘matching’ principle explained above as the line of factoring finance revolves with the creation and collection of book debts.
Over 40,000 businesses in theUKare now using the advantages of invoice finance at various stages of their business life. Using such facilities can release funds based on the value of the business’s outstanding invoices, typically up to 90% and can be available within 24 hours of raising invoices.
This form of finance is even more crucial if other funding requests such as loans and overdrafts are turned down by the business’s current bank. Therefore, more businesses are looking at factoring and discounting. The benefits of these two forms of invoice finance are briefly summarised below:
In a highly competitive market many lenders are offering not only extremely good rates but a flexibility which often includes trial periods, no upfront fees, no minimums and even single invoice factoring. Seeking the help of a broker is a way of being able to find a lender with a good fit to a particular type of business and one where the facility can be moulded to the business’s requirements.
Compare Factoring is an independent broker whose panel includes over 20 of the UK’s best lenders. Nick Cookson, Compare Factoring’s development manager, said “We are experienced in the factoring industry and view each client as an individual. We always carry out an in-depth ‘fact find’ about every business with which we work and not only find an appropriate lender for their business, but also help them through the process. We also offer an on-going support service and a helpline to all of our clients”.
"Target Business Assist have provided our business with a new invoice factoring system that has dramatically improved our cash-flow position and flexibility with our clients..."
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