Here Dr P Singh from Cash for Invoices shares research and answers to why they say your invoices don’t get paid.
Several reasons have been revealed for invoices not being paid to SMES, but single invoice finance from Cash for Invoices Limited can provide essential cash, says Dr P Singh.
Research cited in CityAM showed an alarming state of affairs in recovering money owed to small businesses by debtors.
The research revealed several reasons cited by small businesses as to why they wrote off billions of pounds collectively owed by debtors. Top of the list was insolvency of the debtor, followed by doubt that the debtor had funds to pay.
Equal 3, 4, and 5th place reasons cited were lack of time to chase, risk of damaging the relationship, and no funds to pursue the debtor.
These are all concerning reasons for SMEs writing off collectively £6 billion of debts in 2015/16 according to Direct Line. The average write off was over £31,000 and a staggering 10% of companies each wrote off over £100,000 owed by bad debtors.
These alarming losses might have meant the company had a shortage of cash flow needed for running its business, such as: paying overheads, managing working capital, growth, or research and development. The shortages might have been made up by urgent loans but that solution will have led to further costs (of interest) and reduced bank funding capacity.
Cash for Invoices Limited in London buys single invoices for cash. It will pay up to 97.5% of the invoice amount less a 10% retention that is handed to the company provided its debtor pays the invoice. The fee is therefore just £2.50 per £100 of invoice for a 30-day invoice. A small price to pay to get cash into the business. If the debtor were to default then Cash for Invoices Limited will not sell the invoice back.
Unlike many bank and other factoring companies, a multitude of fees are not charged to benefit from Cash for Invoices Limited single invoice service. No arrangement fee for example and no service charges, exit charges. Nor are there annual renewal charges because no facility is set up with the selling company. There is no commitment for the small business to sell any invoices to Cash for Invoices Limited.
A significant advantage of the single invoice finance service from Cash for Invoices Limited is that it requires no security off the selling company: no debenture, no personal guarantees, or other charges. That is a substantial improvement over many bank and other factoring companies’ factoring facilities.
If a small business answers yes to either of the following questions, then it would benefit from Cash for Invoices Limited’s single invoice finance service:
1 Do you occasionally need more time to pay your supplier invoices?
2 Would you like invoices you send to customers to be paid sooner?
Cash for Invoices Limited’s single invoice finance service outperforms conventional factoring because:
a) it does not require security from the selling business (such as a debenture or guarantee)
b) just one invoice can be sold
c) there is no commitment to sell any invoices to Cash for Invoices Limited, and certainly not the business’s whole sales ledger
d) very small value invoices (from £250) may be sold, ideal for micro-businesses
e) one fee only is charged, plus a refundable retention. Unlike similar service providers, Cash for Invoices Limited does not charge: arrangement, servicing, renewal, or exit fees. The current fee is just 2.5% of the invoice. The refundable retention is 10% of the invoice. This is paid to the business if its debtor pays Cash for Invoices Limited in full and on time.
f) For supplier invoices, the payment date of the supplier’s invoice bought by Cash for Invoices might be extended, giving the business up to 60 days extra time to pay Cash for Invoices Limited.
To get a free no-obligation quote on how much cash you could receive from selling just one invoice, contact Cash for Invoices Limited or call 0208 987 0429
Being in business allows you to push the boundaries of what you think can be achieved. But can you honestly say you sell outside of your comfort zone?
What could happen if you did?
Think it through….if your current marketing strategy allows you to create your current supply of customers what could happen if you pushed yourself outside of your comfort zone?
(Here’s a clue, it will definitely involve more time creating invoices and less time chatting on social media !)
So How Do You Do It?
Really want to get out of your comfort zone?
Tell the INsiders what action you intend to take, and let us support you to achieve it.
Invoice finance (IF) is not considered a credible source of finance among some business owners because of its relatively high cost and onerous terms. Is this perception justified? Dr P Singh of Cash for Invoices Limited investigates.
What is invoice finance? It is the sale of a company’s sales ledger for cash providing an ongoing source of cash as invoices are issued to customers by the company. The company might retain the collection of cash or transfer this and the associated credit risk, to the funder.
Some conventional IF facilities can impose numerous types of fees and charges, and require security and a commitment from the company to sell its entire sales ledger to the finance company. Some companies offer a refreshing financial alternative, offering to buy just a single invoice and charging as few as just one fee and generally offering a more flexible funding alternative.
What is single invoice finance? As its name suggests, it is the purchase of one invoice for cash from a company. The company does not need to sell any further invoices so single invoice finance can be used by companies to raise cash as they need it. Also, they might not need to provide security such as a debenture or a personal guarantee. Single or multiple IF are effective tools for cash management because they liquidate illiquid assets i.e., they convert debtors into cash. The cash realised can be reinvested by the company in profitable projects or used to pay back expensive debt.
Some borrowers might argue that on an annualised basis, the cost of invoice finance is high compared to a conventional loan. That comparison is like comparing apples to oranges because the two financing instruments work differently. A loan is a continuous source of finance whereas single invoice finance is discrete – providing finance for up to 90 days or less. Annualisation of the cost of invoice finance is not therefore consistent with its use. Though the interest rate on a loan might look relatively attractive, the cost of arranging and administering it must also be factored in, such as the arrangement, commitment, non-utilisation, and exit fees, plus servicing charges and legal costs of documentation. There might also be costs to pursue and recover bad debts, or to pay for credit protection. Invoice finance has its own arrangement and administration costs that might be more or less than a bank loan.
Invoice finance is therefore a credible alternative to a loan because:
it converts a company’s debtors into cash that may then be reinvested to potentially generate positive return for the company.
the company can transfer debtor credit risk.
it avoids using up a bank’s limited credit capacity for a company
it diversifies the company’s sources of funds so reducing its reliance on the banking sector.
companies can use it to raise cash as needed
security might not be needed
Dr P Singh of Cash for Invoices Limited finds out.
Invoice finance is a form of asset-backed finance –finance where your company uses a valuable asset as a source of finance.
Instead of waiting for the company’s customer to pay your invoice in 30, 60, or 90 days or longer, you can sell your invoice immediately so receive cash now.
Time is money however, so the amount you receive on sale will be less than the invoice amount. This reduction is not a loss, because you could invest the cash received and earn as much as the invoice amount by the time it is due to be paid.
In addition to having cash sooner, another advantage of invoice finance is the transfer of the risk that your debtor will fail to pay. A bad debt could mean you lose the money you were owed by the debtor and a lot more money paying debt collectors and solicitors to recover the invoice amount.
Many invoice buyers will want you to provide security for the money they give you, in case the invoices they buy become bad debts. Instead, they will charge you for bad debt protection.
Some buyers of invoices take on the responsibility and credit risk of collecting debts from debtors, but others will (if you can show you are competent) allow you to continue to undertake this key task.
Some buyers will not disclose to the debtor that the invoice has been sold nor interfere in the relationship you have with your customer (the debtor). The invoice finance is kept confidential rather than being disclosed.
Many invoice buyers will force you to commit to selling all your invoices to them. In addition to being inflexible, you will have to pay several other fees because the arrangement is similar to having a loan facility from a bank. Some companies, however, allow you to sell single invoices and when you choose, which removes the commitment and reduces costs substantially.
When buying a single invoice, the buyer will usually keep a retention in case the debtor fails to pay. They might for example buy your £1000 invoice for £950 but pay you £800 immediately, less their fee, and the balance of £150, when (if) the debtor pays.
There are many varieties of invoice finance, and corresponding costs, terms and conditions. It is attractive as a source of cash, a means of credit risk transfer, and it diversifies your company’s sources of finance. This last feature can be the difference between your company surviving and failing if your usual lender (your bank usually) withdraws its funding.
Is invoice finance for you?
Do you send customers invoices?
Do you need cash?
Have you supplied a good or service?
Do you have an invoice to sell?
If you tick all the boxes, then invoice finance might be right for you.
Invoice finance, debt factoring, invoice discounting or single invoice finance, are all variations of a theme: good cash management and not always a sign of desperation. Companies should choose to hold cash rather than illiquid invoices because cash can be reinvested in the business to generate high positive net present value, or can be used to pay off expensive debt. Both increase the company’s profit & loss. Invoices do not. Invoices are a drain on the business, generating no return yet costing money to fund outstanding debtors, either because of interest on debt or because of an opportunity cost, plus they represent a credit risk.
Factoring and invoice discounting have tarnished reputations because many of the firms that offer them take a multitude of fees off of the company selling its invoices and they often commit the company to selling more invoices than it would like to.
Single invoice finance is similar to conventional factoring but it can have several key advantages:
An illustrative quote: A single invoice finance company would buy a £100 30-day customer invoice off a company for up to £87.50 paid upfront less the buyer’s fee, and a retention of up to £10 when (if) the debtor pays the invoice, so £97.50 in total (less VAT on the fee). No further fees and no commitment to sell further invoices.
As an affiliate to the Insiders we are able to offer a discount to you, check out this page to learn more and if you would like advice on a particular area relating to cash flow, getting paid and invoicing please do not hesitate to get in touch and we will create content for The Insiders The Knowledge. Contact us here.
Freelance workers based in the UK have a lot of rights but did you know they have a right to join your workplace pension scheme and must be included in your auto-enrolment?
It sounds a bit daft on the face of it, but here is how it goes for workers based in the UK:
If you’re thinking – what has this got to do with me as my freelancers are all self-employed? – then you could be in for a shock.
Freelancers can be running their own business, but they can also be categorised as workers (or even employees). Your label on the relationship does not define their status. Nor does the fact they invoice you, or have other clients, always help.
If they don’t have a company and are invoicing you in person there is a risk your freelancer will be categorized as a worker and this may trigger their entitlements.
Should I tell my customers I don’t answer the phone during school holidays?
Like so many women she was balancing building a business with taking care of her family. She hadn’t been able to find herself a term time only job, so had started a business that would work around her family. She was a ‘mumpreneur’.
Term time only employment contracts can trap women into lower paid roles. Part time employees (red in the bar chart) in small businesses earn the least of all.
No wonder so many women chose self-employment. Be your own boss. Set your own rates. Result. What could be better?
Self-employed earnings have been steadily falling for some years. A lot of people are struggling on the lower hourly rates. Far too many of those are women. Despite being able to set our own pay rates many ‘mumpreneurs’ earn below the National Living Wage. Term time only working only emphasises the problem.
UK schools shut for around 13 weeks a year. If you are take all of that time off you have to earn your income in 39 weeks. Allow another 4 weeks for when the children are ill (or you are) and you are trying to earn a living in 35 weeks a year.
30 £10 £10,500
30 £20 £21,000
Most business owners will tell you that they can’t earn during every hour they give to the business. There are all sorts of things like sales and marketing, administration, dealing with customer queries that have to be fitted it.
Being self-employed means that your annual turnover is not your pay. You will have expenses from equipment, bad debts, insurance, tax, national insurance etc.
Childcare costs can take 50% or more of your gross hourly earnings. If you have more than one child you can find yourself earning less than the cost of childcare since childminders and nurseries charge per child.
The ever changing working family childcare tax credits scheme may help. You need to be available to work for at least 16 hours a week – even if you are not able to charge someone for them. So keep a careful record of how you spend your time as well as your income or you will fall between the gaps in the scheme. If you are not working school holidays these will show up as zero hours for almost one third of the year!
Not only do parents trying to create a business around school holidays lose revenue, but there is a massive effect on the business of this ‘stop-start’ policy. Not only are you not earning during a substantial part of the year, but you are not selling, marketing, learning, developing during this massive gap.
You can’t go letting all your clients go at the beginning of each school holiday.
Nor can you let them down by simply disappearing.
After 37 years in business and two children here are my top tips for growing a business that makes you money and doesn’t stop for holidays.
With planning, resourcefulness and a little bit of luck you can create a business that makes money all year round. You don’t have to stop your business cold every time the schools break up.
As your business grows learn to outsource your work to freelancers who can work when you are not available. You can have a 52 week business without working 52 weeks a year – but you have to plan it, and set it up that way.
Share your top tips for keeping your business going – add a comment and let us know.
Creating flexibility that doesn’t hurt. In these uncertain times we are going to need a lot of that. Employment law and HR specialist with a long standing passion for managing and contracting freelancers and handling tricky relationships at work. Consultant, professional speaker and advisor. Founded Irenicon in 1980 to find the workable space between employment law and relationships and founded KoffeeKlatch in 2009 to support freelancing, family working and the way we work today.
It’s great that you’ve joined the Insiders but are you getting the most out of The Insiders? Here are 5 ideas to help. Remember this group has helped business owners achieve more, sell more, appear in international publications, choose the next step in their business growth, redesigned websites, helped with exhibitions, and overcome some big obstacles to success, what will we achieve together next!
When someone posts on the Insiders share your views. Help the other Insider’s with their needs. In doing this you get to show case your knowledge and experience and help others. And we all know that building good relationships is very important to business success.
If you need something ask for it. So often in business, we struggle on alone, not sure who we can turn to for help and advice. On The Insiders you will get more out of the Insiders if you tell us what you need. Do you need advice on an idea? Do you need to work out what is next? Should you get a press release or blog out and are worried that it’s no good? Use the Insiders as a place to ask anything. It’s confidential and we will do all we can to support your success.
So you don’t know whether your next idea is any good, share it with us and let us share our ideas. And that means you need to share your ideas for others too. Maybe pop by once or twice a week if you are busy and just see what posts people have added and share your ways to help them. It’s not easy to ask for help, so providing a non-judgemental zone to challenge yourself in a kind and supporting way is important when making those big decisions.
Just as we are slow to ask for help, we are never that keen to challenge ideas either. Here it is safe to do so. It doesn’t mean you have to be mean about it, but sharing the opposite view or challenging ideas can be really helpful. Ever noticed how you suffer from shiny syndrome disease? Shy Syndrome is where you are working towards a business goal then something else comes along and before you know it you’ve changed direction. Challenging others shows you are up to being challenged too. And that is going to be good for business as we become an extension of your business. Your very own sounding board!
The affiliates list is growing and you can now get at least a 10% discount on things from web sites, and holidays, to policy documentation and training on social media. Even my courses are reduced for Insiders, and they were inexpensive in the first place! Have you checked out who you could be doing business with for a discount? The other great thing about the affiliates is if you see one that you would love some advise for they are happy to deliver personalised webinars just for our group! ££££ of training on top of everything else, for free!
Don’t see what you want or need? Got an idea for us? Then you know you can always talk to us. The Insiders is here to help you grow personally and professionally to create a business you love, to sustain and grow it. So if you think we could help in another way, just say.
I’ve thought often about writing this article, and always shied away from being a bit controversial. (If you read my articles before either here or on www.mandieholgate.co.uk you will know I tend to be about empowering, sharing top tips to make life, business, success and confidence just that be easier.) However I felt that I’d seen this happening too many times not to say something.
And the reason I say something now is because I can’t believe something that I thought was a given, an obvious expected standard, just doesn’t always exist, and not only is it not particularly pleasant to work in that environment, if you are doing this, then you could be damaging your success too! (So this article does come back to what I normally write about after all!)
The more I get asked to speak at events the more I naturally end up attending a variety of events aimed at personal and professional development and business success. And whether I’m attending a local business show a national one or a special all day event it really shocks me how many people that just don’t turn up!
What’s the big deal you say? It’s a free event, there’s no cost, so?
The big deal is that I personally think it impacts on your professional brand and what people think of you.
Think about it. You posted all over social media you were attending. You said you will be there. And then something came up, right? No big deal. But although there’s 500 – 2000 people at that event and you figure no one will miss you right?
They will, because there in reception when we all arrive is your lanyard with your name and business on, and then at the end of the day its still there!
Sorry did something better come up than what you thought was going to be an awesome day?
A client maybe?
I have a real issue with this, because firstly it shows a high level of disrespect to the organisers. It may seem like just a lanyard to you, but it’s not for the organisers. An organiser of an event need to ensure for every name that turns up there is adequate parking, adequate refreshments, adequate seating, someone has to take the time to print off and make your lanyard. As the numbers for the event increases the organisers think “wowsers we’ve got xxxx people booked for this, we should slow down on marketing, we may have to turn people away, our maximum capacity for safety is xxxx” So you greatly impact on the organisers.
Secondly if you’ve posted you are attending and don’t show, what does that say to those that do turn up? Is it a bad event we shouldn’t be at? Have we wasted our time? It can create unease in the delegates (I do not jest! I’ve seen it across social media damaging the reputation of events for years to come!)
More worryingly those that do turn up know who hasn’t arrived and think “Do they ever turn up to what they say they will?” What does that say about you, your professionalism and your business?
Can someone be trusted if they can’t even turn up to what they say they are going to?
Can they not organise their time to be able to have a day out of the office?
If you don’t know if you will be too pressurised to attend then don’t fill in the form saying you are going. Leave your status as interested.
And if you worry about giving up a day to this event top tips here are our top tips to get the most out of your day and double the usages of your time;
Tell everyone you are attending. This is good for the organiser (you are promoting their event. This may seem like its non beneficial to you, however getting yourself known for all the right reasons is a good way to get remembered. And remember in business its about the quality of relationships you build). By telling everyone you are attending before you even arrive you are getting to digitally network with potential customers and opportunities. It’s a great way to create brand awareness with very little effort.
Organise meetings and 1 2 1’s at the event. We all appreciate the need to know other people, and build good relationships however ultimately sorry to get tough here, those meetings quite from day one don’t always deliver business, and if you are very busy it can be very enticing to not bother with them. If you have been building rapport and getting to know people online, a big event is a great opportunity to spare half an hour and extend that potential opportunity. (And word of caution here, that’s build opportunity for them too, not just you!)
Talk about the event in the run up to the event. This is a great way to get you and your business known before you even walk through the door. There will be companies that can’t make the day, however if you have talked about the event in your own marketing, at events you are attending and to your current customers then you are helping to raise awareness of the calibre of events you attend and how your business is operated. People like professionalism. And to feel that they can trust and know the businesses that they work with. This helps.
Power up your PR! When it comes to trade press and relevant publications to your business, talking about the events you are involved with can be a great way to get your business seen for the right reasons, and raise your name above your competitors. Just remember if your attendtion is to send in a press release saying “SL Products attended this expo” the journalist is likely to say “big deal!” on the other hand if you are saying that your company was awarded the only trade stand for your industry at a UK wide event with over 200 exhibitors for the third year running. That says something about your company doesn’t it?
Don’t create a headache afterwards. One of the reasons people don’t turn up to events I feel is because they worry about the follow up and additional work load that it can create afterwards. Firstly reframe the way you word this. Instead of saying “I’m going to need at least 4 hours to process that event to get maximum benefit from that day and justify the costs.” Reframe this to; “In one day I will be able to generate enough leads to grow our business as planned this quarter, which could substantially reduce my marketing requirements this month and thus further increase our sales this year.” Your mind will happily create belief in what you say. So if you assume it’s going to be hard work, increase your work load and be a hassle enducing process, get what you are going to get? On the day ensure you are getting potential time wasters (you know the types, I call them Likers. They like everything you do, but are never going to follow up, get involved, support you or buy from you. They just take everyone’s freebies and tell everyone about their business and clear off!) So get the time wasters to do the work, ie “That sounds interesting, if you email/phone me next week when I’m back in the office we can investigate that in more detail.” It’s a great way of finding out who is there to do business and who is there to restock their stationery cupboard.
If a conversation is going really well, don’t leave it to the following day (when let’s be honest you are still exhausted from the show!) to get in touch, get it sorted there and then. Have your diary it and show your intent. “That’s great, lets Skype and move this along”. If you want something don’t hang about. There are so many opportunities and so many people talking at an event, you can find that in 2 days time your conversation is getting lost in their minds to a bucket load of work. Don’t let that happen by sorting things on the day.
Create a structure to how you process events. By doing this, you can learn the science of what works for you. Trial different things, until you find a style that works for you. Time how long it takes to process it. This is a great way for you Procrastinators to see an end to the job. Procrastinators stop procrastinating when they can see it’s not as hard, scary or boring as they thought it was going to be. So think about the results you want and how fast you can process it!
I hope you have found this a useful addition to your learning over here on the Insiders and if you have comments and ideas to share, please do! You know the Insiders is awesome because of you, your views, ideas and support for each others success. Awesome isn’t it?
I shared this video of a bird attacking itself in the mirror and spoke about how he was perceiving non existent threat, and it made me think how many business owners do this too. Here are 4 quick top tips to help you deal with the threats that aren’t even there that attack your mind and stop you from achieving more, because this is important to remember, if you don’t deal with these threats, even the non existent ones they will hang out in your subconscious, and that enables damage to the quality of the actions you take, your thoughts, your beliefs and your results. Ready to deal with them?