Choosing the right Invoice finance package for you
It can seem a little frightening choosing which Invoice Package that you want. It’s something you probably haven’t done before, and probably not given a lot of thought to – apart form the obvious ‘well I just want the cash from my invoices’.
OK, before diving into getting your cash, it’s best if you give a little thought to how you want to facility to run. In order to do this properly you need to think about your company, and how it will work best for you.
Decision 1: Do you want to chase the invoices or have someone else do it?
When considering this, it’s important to remember that Credit Control is an important part of your relationship with your clients. If you are going to pass over invoice chasing, you should make sure you make contact with your clients on a regular basis in order to build those relationships.
- If you want to chase payments yourself then it’s Invoice Discounting
- If you want the provider to chase then it’s Factoring
Decision 2: Now you have decide the terms you want the provision over.
Despite what you may have heard you don’t need to be tied into your Invoice Finance arrangement for several years (although it is more cost effective if you do).
Your options are:
One off – only one invoice paid.
If you have a one off large invoice you want finance against then this is the option for you. You will draw down against this invoice only, once it’s been paid, you walk away. It is also known as Spot Invoice Finance.
One month rolling contract.
Looking for something on a ‘no-commitment’ basis then this is the way for you. The contract is for a month. Once those months invoices are done, then you can go on your way. There is a cost implication (typically 1% higher than a long term contract). But if you just need a boost to your cash flow as your business goes through a change, then this is the way for you.
Long term arrangement (usually 2 years)
Most businesses end up opting for this, it’s slightly less expensive than a month contract, but every penny does count as they say. You run the contract for an agreed time period, at the end of it, you can cancel at any time.
You should have a better idea which sort of Invoice Finance you want now – it just comes down to sorting out the details!