If your clients refuse to settle their invoices, it is important that you plug the cash flow gap, so you have the money required to support your company’s day-to-day operations. Increasingly, new research has shown the Commercial Domestic Investigations team that UK small to medium-sized enterprises (SMEs) are turning to ‘invoice finance’ to shore up their cash flow.

Invoice financing

According to the Daily Mail, 60% of all invoices issued by UK-based small companies are paid late. In early 2016, a survey conducted by Zurich of 600 SME owners and decisions makers found that 41% admit that delayed payments have had an adverse effect on their company’s cash flow. Meanwhile, 67% of those questioned said that some SMEs are being forced to shut down due to late payments.

Many small business owners are now turning to ‘invoice finance’ to plug the cash flow holes that come with late payments. Explaining invoice finance, the British government writes that it “is where a third party agrees to buy your unpaid invoices for a fee. Invoice financiers can be independent, or part of a bank or financial institution.” Research published by Asset Based Finance Association (ABFA) shows that invoice financing is now an essential funding source for UK SMEs.

Funding source

Business portal Start-Ups writes that between January and March 2016, £711m was lent to small companies via invoice finance. This represents a staggering 60% rise on the first three months of 2015, when £485m was provided to UK small firms through invoice finance. ABFA found that on average, businesses raised £52,000 each through invoice finance in the first quarter of 2016.

Commenting, ABFA Chief Executive Jeff Longhurst said: “Invoice finance is now one of the primary ways that small businesses access funding. We are seeing a growing appetite amongst small and medium enterprises to secure funding through this route with businesses securing ever increasing amounts.

Continuing, Longhurst noted: “Since the credit crunch, accessing funding through traditional paths such as business loans has remained challenging for smaller businesses, and so the flexibility of finance options, competitive prices and the quick turnaround of decisions associated with invoice finance is a real draw for these businesses.”

Finding solutions

In other words, you do not have to write off unpaid invoices as bad debt. In the worst scenarios, you can use them to raise invoice finance. However, in order to maximise profit you may want to explore other measures before you take this drastic action, such as debt recovery. With this action, you can ensure that you will be able to plug cash flow holes, so your company grows going forward.

About Commercial Domestic Investigations

Commercial Domestic Investigations are regarded within the debt collection and credit control industry as one of the best credit management companies in the UK. Established in 1988 to support and service all sizes of companies in the field of Credit Management.

Commercial Domestic Investigations have recently featured in the press in The Guardian. To keep up to date with the latest debt collection news make sure to follow Commercial Domestic Investigations on twitter, LinkedIn and Google+.

We now boast a national client base in excess of 30,000 companies. Commercial Domestic Investigations has grown by listening to clients’ requirements and adapting our services to meet all companies’ needs from Sole Traders, SMES, Ltd and Plus. Please contact us on 08444 159200 for more information.

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