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How Invoice finance can be good for your health

How Invoice finance can be good for your health

Just as much as growing sales, managing cash flow and keeping the workforce motivated and inspired are important concerns for many business owners, keeping a good balance between work and life can be critical to longer term success and personal happiness.

Increasingly, business owners are showing a willingness to outsource ancillary functions to experts, not only as a means to reduce cost, improve results and ensure business agility, but to remain focussed on what is important. This focus is extremely difficult to achieve for smaller businesses in the ‘cut and thrust’ of the average business day, and over time the workload can take a serious toll on the individual over time, particularly if things aren’t going well.

For the health conscious business owner, invoice finance could be just the tonic:

1) Peace of mind

The uncertainty around unpaid customer debts is often what keeps business owners up at night and it is easy to understand why. A bad debt of $20,000 with an average sale margin of $2500 will take approximately 8 additional sales to fully offset, which in tough sales environments is extremely difficult to achieve, let alone time consuming. Bad debts may even cause more serious issues which can affect the ability to turn a profit or access finance.

Invoice finance is essentially a line of credit against a business’ receivables, which also provides the business owner the security of having funding available ‘at call’ within 24 hours. This offers peace of mind in itself, but in addition, with an invoice finance facility the business owner will have access to a team of professionals whose expertise is in managing accounts receivable and whose primary motivation is to reduce debtor days. For every five additional days that the owner has to wait for invoices to be paid (and therefore financed), at a rate of interest of 8% this would equate to $1,100 lost margin based on an outstanding debt of $1,000,000, in addition to the opportunity cost of not having that cash at bank. In this way, by outsourcing the receivables management to specialists the business owner can consider their cash flow ‘protected’ which offers good peace of mind.

Some providers also offer a form of credit insurance, which will insure the debts against the risk of non-payment or inability to pay. This allows the business owner to invest with confidence with the knowledge that cash flow is protected.

2) Spend time on what invigorates you in business

Let’s face it – it is not the invoicing, reconciliations, collection calls and administration which keep the business owner hungry and invigorated. It’s the bigger picture – the vision, the strategy, the opportunities and threats, and the desire to create wealth.

There is often a significant cost associated with cash flow management, from the wages of a dedicated role to the systems and communications required to manage it. Time and resource is extremely limited and therefore valuable, so invoice finance presents a way of freeing up that time which can better be spent on the things which make the business owner fresh, energised, happy and hungry for more success – likely to be the reasons they got into business in the first place.

Businesses which stand still put themselves at risk in dynamic markets. The value of spending more time on the business as opposed to in it is often not considered and outsourcing is just one solution to ensure the business continues to look out and forward.

3) Free time for what really matters

At the end of the day, whilst the enjoyment and exhilaration of running a business is its own reward, it is usually a means to an end to enjoy life. For most business owners time to spend outside the business is extremely limited, so the less time spent managing cash flow and fretting over financial concerns and losing sleep, the more quality time is able to be spent on things like family, holidays, travel and hobbies which re-energise the business owner for the challenges of running and growing a business.


Work-life balance tips for SMEs
Struggling to get the finance you need? Top tips f...

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