Posted on 25.09.2019, 11:42
Larger companies usually have an invoice ledger that monitors transactions throughout. Other businesses may have fewer people allocated to these tasks, and in small businesses the CEO may handle almost everything. But regardless of this there is one question that cause headaches for small and large alike – What happens if we don’t manage to balance the accounts?
1. Long credits
It’s not unusual to offer special treatment to larger clients, often in the form of longer credits. As much as 90 days, which is far from optional for your business. But sometimes you have no choice but to accept it. If you find yourself in a critical situation because of these clients the ultimate solution is to sell your invoice. The money will be available to you quickly, while the customer can continue to enjoy a long credit.
2. Late payments
Payments is the type of liquidity flow that is most difficult to administer, since it is beyond your control. Many businesses today experience lack of liquidity due to late payments, and the solutions may be as follows: either you conduct business with better clients, and negotiate shorter credits, or you delegate the risk of credit to a company that is willing to buy your invoice.
3. The risks of selling your invoice
Already at the point of delivery you assume financial risk. If the payment fails to materialise this risk increases, and if the customer expects continuous delivery despite continuous non-payment, the risk increases at every turn. It isn’t beneficial for your company, nor is the added stress beneficial for you personally. An Ibuprofen may help this headache temporarily, but for the long term you need a better solution.
Late payments also leads to a greater burden of administration. The most common causes of late payments are that the invoice failed to reach the customer, that the invoice is faulty, that the customer doesn’t agree on the completion of delivery of the service/goods, or that the customer may have issues of liquidity and simply can’t pay the invoice. The time and effort it take to investigate, administer and solve these issues can be entrusted to a company that buys the invoice. It frees up your resources to be put to better use.
5. Poor liquidity
All the factors above add to poorer liquidity. I don’t think this requires further explanations, other than that the most effective way to increase your liquidity and improve your balance sheet is to sell your invoices, and through that quickly access essential funds.
Get rid of your headaches
When selling your invoice there are several ways to get rid of your headaches, enabling you to focus on the activities your company set out to do, and achieving greater profitability: Peer-to-peer, bank loan, factoring, invoice mortgaging, crowdfunding, leasing etc.