Cash flow is one of the best identifiers of business success. How a company manages its cash flow determines the level of success it achieves in the long run. Ideally, a business owner should have maximum time to focus on his / her entrepreneurial growth rather than tracking down invoice payments month in and month out. But, for a small business owner in India, getting paid on time and investing that money to generate more business is a chore in itself. Small businesses are often held back by a lack of ready cash due to delayed cycle of invoice payments extending up to 90-days. That is where invoice finance or invoice discounting comes in handy.
Invoice finance allows SMEs to streamline their cash flow by enabling early payments for fulfilled contracts.
Here are the 5 ways in which invoice discounting can help to grow your business:
Streamlining Cash Flow:
You can use invoice finance loans for topping up your working capital fund to pay your staff and suppliers on time. This will make sure that you have surplus cash for investing in growth, bulk purchase deals and discounts that come your way.
Invoice discounting allows you to speed up your payments to suppliers. By paying your suppliers early, you get contracts for early delivery of goods and raw materials, which, in turn, will speed up your operations and further delivery up the supply chain.
Nurture Credit Relationships:
Streamlined cash flow enables you to service your creditor accounts on time. So, you get to improve your credit history and get access to increased credit limits and better payment terms you’re your suppliers. Better purchasing power means more suppliers will want to work with you, hence reducing your overall costing and increasing your profits.
Serves as an Asset:
By providing funding against your business’s sales ledger, invoice discounting converts it into an asset that can be collateralized for a business loan without reducing its value. That’s one of the best advantages of invoice discounting.