We recently discussed in a previous blog about how invoice financing can help businesses release funds tied up in unpaid invoices from their clients and increase their cash flow. Now we want to talk about how a business changes when they have an improved cash flow readily available to them.
Reduced cash flows are disruptive to the everyday operations of every business, stalling the opportunity for expansion and even putting certain businesses at risk of falling behind on their own payments.
All successful businesses need to have a successful cash flow management system in place in order to balance the ingoings and outgoings. When cash flow is managed effectively, and incomings are steady, there is much more available to businesses in the form of the following benefits:
Growing a business
The first obvious benefit to having more money available is being able to grow the business; whether this is via increasing the amount of purchasing (products/materials) thus increasing the potential profits, or investing in improved equipment or facilities to help increase the production on site.
Re-investment is essential to modern businesses if they want to keep up to date in a constantly evolving market and it helps them create more economical ways of operating.
Removal of stress
If a business is constantly chasing late invoice payments, they can end up waiting desperately for cash injections just to keep their heads above water. Not knowing where your next payment is going to come from, if at all, can be extremely stressful for business owners who have their own financial obligations to attend to.
One late invoice payment from a client can have a knock-on effect that causes payment problems for more and more people down the line. We know that stress can not only cause conflict within a company but can also cause health issues for those put under prolonged stress. With cash flow more readily available to a business, they don’t need to worry about where the next payment is going to come from and can focus on the everyday running of the company, and making sure employees are paid on time.
Avoids external financing
Cash flow problems often lead businesses to borrow, mainly through bank loans. This adds further problems for cash flow in the future as now an extra avenue of outgoing payment has been created via loan repayments. These can be exacerbated when further outstanding invoices are not paid, too.
Through invoice financing businesses are able to keep their cash flow steady by securing at least 85% of total outstanding invoices immediately and removing the stress and hassle of constantly chasing payments from clients, allowing their available finances to improve their company in a number of areas.