Cash flow problems are some of the most pertinent issues when it comes to running and business or operating a company. With the onslaught of the pandemic, this issue has been amplified throughout the past couple of years. Throughout the world, companies have been facing increasing cash flow issues as customers scramble to find their own sources of finance.
Finance managers are constantly on the lookout for the best solutions for their cash flow problems, and as such, a myriad of solutions have popped up over the years. One such solution to cash flow problems is Invoice Finance, and by extension, Invoice Factoring.
Both Invoice Financing and Factoring are excellent solutions to helping you solve your cash flow problems. However, contrary to popular belief, they aren’t the same thing. Before differentiating between the two terms, it is crucial to understand the two separately.
What is Invoice Financing?
Invoice Financing is essentially a way to help businesses manage their cash flow by borrowing money against their outstanding invoices for receivables. Basically, as a business owner or finance manager, you will be selling your outstanding invoices to a third party who will pay off a majority of the amount as a loan to you. You won’t need to wait for customers to pay off their invoices, and you can still go about your operations. When your customer has paid their invoice, that amount will be transferred to the third party that paid for them in the first place.
Why use Invoice Financing?
As mentioned earlier, Invoice Financing gives you immediate funding without you having to wait for your customers’ input. It provides an easy solution to your immediate cash flow problems. If your business is struggling with a lack of funding for an essential project or operation, then this is the finance method to go for!
Suppose your business or company prefers to keep matters more private. In that case, another benefit to Invoice Financing is that you get to keep your finance sources completely confidential – your customers will not be aware that you are resorting to Invoice Financing. Smaller businesses can definitely benefit more from Invoice Financing, as they tend to rely the most on customers’ payments for their business to be operational. For more details and guidance on that matter, check out this link!
What is Invoice Factoring?
Invoice Factoring isn’t all that different from Invoice Financing, but there is a slight contrast between the two. For Invoice Financing, you sell your invoice to an Invoice Financing third party, and when you receive your customers’ payments, you pay the third party off. For Invoice Factoring, however, you sell your invoice in its entirety to a third party, and the third party will be responsible for collecting the loan rather than yourself.
Why use Invoice Factoring?
The most obvious advantage of Invoice Factoring is that you won’t need to bother yourself over the collection of your outstanding receivable. Once a third party has purchased your invoice, you will no longer be responsible for all that hassle. They will have to actively remain in contact with the customer for the outstanding payment, saving you both time and effort, which you can invest elsewhere.
It is also less risky than Invoice Financing. Invoice Financing will leave you hanging when it comes to bad debts – you’ll have to pay back the third party in case a customer never pays their debt off. This is not the case for Invoice Factoring, so it’s a much safer option. For more details about the difference between the two, check out this link.
Logistics Invoice Finance
The Logistics industry is one of the most important ones when it comes to the economy of a country. Their main task is to manage resources between the customers and the companies. They manage the supply chain to make it as efficient and effective as possible.
Naturally, with the pandemic disrupting the entire world, their job has become much more challenging than it used to be, with working capital issues at the forefront. The delays in item deliveries, followed by delays in payments, have only added to this issue. This is where Logistics Invoice Finance comes in.
Lockdowns and restrictions have forced most trade to temporarily close down, so the cash in the Logistics and Transportation industry is tied up along with the items at the ports. Here, Invoice Finance companies can buy off invoices from Logistics companies and allow them to maintain a smoother cash flow without waiting for their products to reach the end of the supply chain.
What are the benefits of Logistics Invoice Financing?
Improve cash flow
The primary issue of the industry is associated with cash flow. For that, Logistics Invoice Financing can improve their financial position and provide such companies with the working capital they need to continue their operations without remaining tied to the barriers in the supply chain nowadays.
Keep up with the increasing demand
With the immediate cash you receive from Logistics Invoice Financing and Logistics Invoice Factoring, you can invest in your business to keep up with the increasing demand. The pandemic has resulted in the demand for some products being blown out of proportion, so it is essential to keep up with it to ensure the survival of your business. In that case, Logistics Invoice Finance can allow you to operate more efficiently.
No extra burden
With Logistics Invoice Factoring, you won’t have to waste your time chasing after delayed payments or outstanding invoices. The Invoice Factoring company will have it under control. You will be able to invest your time in more pressing matters, and you’ll get your dues on time.
Are you looking for a reliable lender for your Invoice Financing? Check out this link to find the best one for you! Keep in mind that the Logistics and Transport industry aren’t the only businesses benefiting from Invoice Finance. If you’re interested in delving deeper into how it can help other industries, read more here!