How to Deal With Late Invoices?

Late invoices are a common pet peeve for small business owners. Many small and medium enterprises provide goods and services on credit. However, due to various reasons, their customers are not always timely when it comes to clearing these invoices. Late invoices can cause cash flow issues for firms, making it difficult for them to pay for crucial business expenses. Delayed customer payments can also give rise to administrative hassles as the business owner must spend time and resources to chase those payments. If you are a business owner struggling with this problem, invoice finance may be the perfect solution for you! Let’s understand what it means and how you can use it to deal with delayed payments.

Navigating Late Payments From Customers: What Should You Do?

A delay in payment from a large account can cause significant cash flow problems for your business. You can try the following solutions to recoup your money and safeguard your firm:

• Establish an accounts receivables automation system for managing overdue invoices. This mechanism will help you track delayed payments and automate follow-ups or reminders.
• Communicate effectively with your clients to build a regular payment cycle. Building a rapport with key client groups can go a long way in easing your cash flow problems.
• Try an invoice financing solution to unlock a cash infusion when your customers fail to pay. Some invoice financing solutions may even help you get rid of the hassles of chasing payments from clients.

What is Invoice Finance and How Can It Help?

Invoice finance represents a credit facility where businesses can borrow money against uncleared invoices. Once a business raises an invoice for goods or services delivered to customers, it can use invoice financing to access funds. This popular financing instrument allows business owners to deal with the issue of late invoices and delayed payments.

In invoice financing, a lender approves a monetary limit for the borrower against their unpaid invoices. As a result, the firm may be able to access up to 95% of the value of these late invoices. Once the firm’s customers pay for these invoices, the lender can recoup the money they lent. The business pays interest on the amount they withdraw under the approved limit.

Types of Invoice Financing

Invoice financing, also known as receivables financing, has two broad categories. Let’s break down these two types:

• Invoice Discounting: Invoice discounting is a solution where you can put up your outstanding invoices as collateral for taking a business loan. The lender approves up to 95% of the invoice amount as a loan. You must pay interest on any amount that you borrow. At the same time, the rights and responsibilities of collecting these invoices remain with you.
• Invoice Factoring: Invoice factoring is a creative financing solution that helps you manage delayed invoices. This facility allows you to sell your accounts receivables to a financing company. They approve a business loan of up to 90% of the invoice amount. The lender factors the invoice at a discounted value. At the same time, they take charge of chasing these invoices. As a result, you no longer have to bear the hassles of chasing these payments. You can pass the collection risk to the lender and use the loan amount to grow your business.

If these options sound interesting, you can contact the Broc Finance team to find out more. Talk to them about your invoice financing needs to determine an optimal solution today!