The Basics

At its core, invoice finance is a means for businesses to unlock the cash tied up in their unpaid invoices. It grants immediate access to a proportion of the invoice value, usually around 85-90%, with the rest paid upon customer settlement—essentially accelerating cash inflow without waiting out the payment terms.

Variants and Their Workings

There are two primary flavours of invoice finance: factoring and discounting. Factoring involves the business selling its unpaid invoices to a third party, thus outsourcing both the debt collection and credit control to the financier. Invoice discounting, on the other hand, allows a business to draw money against its sales invoices before they’re paid, with the business retaining responsibility for collecting invoice payments. Both models offer a fast cash injection when traditional lending may not be available.

There are two primary products of invoice finance: factoring and discounting. Factoring involves the business selling its unpaid invoice individually to the lender, and the lender providing access to the cash these invoices generate. Discounting involves the business selling its total outstanding sales ledger and the lender providing access to cash the whole ledger generates. The debt collection is usually provided by the lender with a factoring facility and usually not with a discounting facility.

The Role of Invoice Finance Brokers

Finance Options

An invoice finance broker simplifies the process for accountants and their small business clients. Brokers have an intricate understanding of the financial marketplace, enabling them to match businesses with the most suitable lenders and products.

Partnership with Accountants

Brokers work together with accountants, complementing their expertise. Rather than undermining the accountant’s role, a broker enhances it—empowering accountants to offer an extended suite of services that include sophisticated financial products tailored to the client’s immediate needs.

Benefits for Business

For small businesses, the broker’s support can be transformational. They provide access to multiple lenders, ensuring businesses get the best deal. Brokers guide businesses through often long-winded application processes, maximising the likelihood of approval, and steers clear of potential pitfalls, all while negotiating more favourable terms.

Impact on Small Businesses

Success Stories

The efficacy of invoice finance and broker partnerships shines through in the stories of small businesses that have surged ahead thanks to the timely influx of working capital. From seamless day-to-day operations to funding ambitious growth plans, small businesses are discovering new new ways of being agile and resilient.

Empowering Financial Flexibility

With an invoice finance broker at the helm, small businesses can plan with greater assurance. They can meet payroll on time, take advantage of growth opportunities, and alleviate the stress of imminent expenses. This financial flexibility can give a business the ability to take advantage of opportunities they normally wouldn’t be able to take advantage of.

The Accountant’s Perspective

Cash Flow Challenges for Small Businesses

Insights from accountants reveal a common thread among small businesses—cash flow concerns. Managing day-to-day operations, navigating seasonal fluctuations, and coping with delayed payments emerge as recurring problems. The broker-accountant relationship can help to tackle these pain points.

A Strategic Partnership

From the accountant’s viewpoint, collaboration with an invoice finance broker is not just desirable but strategic. It supports the accountant’s advisory role, providing clients with the toolkit to succeed financially. Brokers also act as an extension of the accounting team, contributing a depth of financial insight and offering value-added services for clients.

Summary

The role of an invoice finance broker in supporting small business financial strategies is under-utilised. By bridging the gap between accountants, business owners, and financial products, brokers facilitate a relationship that results in sustainable growth and financial freedom of choice.