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29th September 2021Single invoice finance: the flexible alternative says Cash for Invoices Limited
Cash for Invoices Limited – the single invoice finance buyer based in London, highlights the attractions and mechanics of invoice finance and in particular, single invoice finance.
What is invoice finance?
In essence, a third party provides cash to a business in exchange for the business selling a trade invoice to the third party. In other words, it’s a swap. Cash for Invoices Limited’s business name describes precisely what invoice finance is: “cash for invoices”.
Not sure what an invoice is?
Invoices are a trade receivable, i.e., when a business sells a good or provides a service, it gives its customer time, say 30 days, to pay. The document setting out the terms of the agreement to pay later is called an invoice.
Key information the invoice should state includes: the names of the supplier and customer; the invoice issue and payment dates; the service or goods supplied; the bank account to pay money to; the amount to pay and the VAT (if any). The invoice should also state what action will be taken by the supplier if the invoice is not paid when due.
Single invoice finance
As its name suggests, single invoice finance is the swap of a single invoice for cash.
Single invoice finance is a relatively new development of invoice finance, Traditionally, invoice finance companies would require the business in need of cash to enter into an invoice finance facility that committed the business to sell all its trade invoices for cash.
Not only is that an expensive source of cash because of all the numerous fees payable, but it is inefficient to receive cash in exchange for invoices when the business does not need it.
Cash for Invoices Limited’s single invoice finance service is a radical improvement in a) invoice finance flexibility and b) invoice finance cost.
No facility is set up. The business decides if and when it wants to sell an invoice and so it dictates when to receive cash. That is perfect for its working capital management. If for example the business needs cash to buy extra stock, it can sell an invoice to raise the necessary cash. On the other hand, if some of its debtors pay their invoices, that cash can be used to buy the stock without the need to sell an invoice.
Cash for Invoices Limited only charges one fee for its service. Unlike conventional invoice finance, there are no arrangements, maintenance, exit, annual, or many other kinds of fees for the business to pay.
The fee charged by Cash for Invoices Limited is similar to an interest rate because it is charged from the date of the invoice purchase to the invoice payment date, i.e., it is time-dependant.
Another positive difference between single and conventional invoice finance is Cash for Invoices Limited does not require a charge over the business’s assets, neither a fixed nor floating charge. The business therefore has the flexibility to sell its assets as and when it wishes without prior approval.
Clarity Fairness and Trust are very important. A business needs to be clear about what its costs are and its obligations. They say time is money, so it’s only fair that the business pays for the time it receives cash in advance of the invoice payment date. Trust is critical – Cash for Invoices Limited needs to know the invoice it is paying for is genuine, and that the debtor will honour its obligation to pay on the invoice payment date, and in full.
Many businesses fail not because they are not profitable, but because they don’t have enough cash. Single invoice finance provides that cash just when it is needed, efficiently and flexibly.
Permjit Singh is Director and Founder of Cash for Invoices Limited