Don't Let Late Payers Sink Your Business - Invoice Finance Explained

4 July 2024

Don't Let Late Payers Sink Your Business: Discover Invoice Financing

By Jaden Husin

04 July 2024 | 4 min read

Picture this: your suppliers are tapping their toes, waiting for payments, while you're left juggling your own bills and late payments from clients. It’s a stressful scenario that can put massive pressure on your business.

When waiting isn’t an option, invoice financing (also known as debtor finance) could be your saving grace. Let’s dive in and see how it can solve your cash flow problems once and for all.

What is Invoice Finance?

Late payments from clients can send ripples through your business, straining cash flow and jeopardising relationships with suppliers. Many businesses have folded despite turning a profit simply because they ran out of money while waiting for invoices to be paid. But there's a lifeline: invoice finance.

This clever solution bridges the gap between incoming and outgoing payments, cushioning the blow of late payments on your business.

Invoice finance is a game-changer, especially for manufacturing and B2B businesses that sit between clients and suppliers. It keeps trade flowing smoothly, protects your business from bottlenecks, ensures bills are paid on time, and eliminates the stress of chasing late payments.

How Does Invoice Finance Work?

Invoice finance lets you leverage unpaid invoices to free up cash flow.

Here’s how it works: your lender advances you a percentage (usually around 80%) of the invoice amount owed by your customer.

This means you can pay your suppliers on time without disrupting your cash flow, while the lender takes on the debt. Once the invoices are paid, you repay your lender over a longer, more favourable term.

There are two main types of invoice financing: invoice factoring and invoice discounting.

The key difference lies in the level of control your lender has over your sales ledger.

Not sure which type suits you best? Chat with a Motive lending expert today for personalised advice.

Benefits of Invoice Finance

Invoice finance keeps your business moving and your suppliers happy. Here are the key benefits:

Bridge Payment Gaps: Keep your suppliers happy by maintaining a steady flow of payments.
Healthy Cash Flow: Manage your invoices with ease and maintain a healthy cash flow.
Favourable Repayment Terms: Pay your lender back over a longer period on more favorable terms.
Avoid Bottlenecks: Prevent bottlenecks and the stress of chasing late payments.
No Late Fees: Avoid late fees and penalties from suppliers.

Tips for Managing Late Payments from Clients

Struggling with late payments? Here are some tips to manage and prevent them:

1. Offer a Discount

Encourage clients to pay early by offering a cash incentive. A small discount can go a long way in saying “thanks” for prompt payments.

2. Send Invoices ASAP

Give your clients ample time to pay their bills by sending invoices as soon as possible. Being organized sets the stage for timely payments.

3. Set Up Automated Reminders

Send an email or text reminder a few days before invoices are due. This keeps your business top of mind and minimizes occasional slips.

4. Identify the Problem

If a client consistently pays late, there might be an underlying issue. Is there a hold-up on their end? Problems with your product? Encourage open communication to find a solution, like setting up a regular payment schedule.

Late payments don’t have to spell disaster for your business. With invoice financing, you can keep your cash flow healthy, your suppliers happy, and your stress levels low. Ready to explore your options?

Book a call with one of our specialist business lending brokers today and take control of your cash flow.

Our service is completley free.