A Quick Guide to Invoice Finance – A Small Business Cash Flow Solution

Although there are many ways to manage the cash flow of a small business and it is of course vital to become an expert in these if you intend to stay in business, all of the advice for keeping cash flowing becomes redundant once you find yourself in the midst of a struggle for revenue. When your small business hits a cash flow crisis you will probably find yourself casting around for a life line; and there will be many offered to you, as cash flow solutions are the bread and butter of many finance companies.

One of the most commonly talked about will probably be Invoice Finance an inoffensive sounding term that covers several different financing options. You may also hear it referred to as cash flow finance, receivable finance, debtor finance or sales finance, but what is it?

In simple terms Invoice Finance is a way for a business to use its debtor book as security and release usually up to 85% of the cash tied-up in waiting for money due in to the business from unpaid invoices. There are many industries that rely on this type of financing to trade, agencies who supply temporary staff for instance, as their usual practice will mean unusual cash flow situations as they have to pay large numbers of staff on a weekly or daily basis, but will probably await settlement of invoices for the supply of the staff for a month or so.

The term Invoice Finance, actually covers three main types of finance solutions and although all achieve the same goal of freeing-up a business’ cash flow and all use outstanding invoices as security, the three work in subtly but crucially different ways.

Factoring

With factoring a finance company will step in and take over the management of a business’ sales ledger and credit control. In essence the invoices are ‘purchased’ for a large percentage of their worth to release the cash back into the business and the factoring company then pursues the debtors in the usual way. Many small businesses prefer this as they often lack the facilities to manager their own credit control.

Invoice Discounting

Like factoring in that it releases a similar amount of cash back into the business with outstanding invoices used as security, but usually a confidential service without customers aware that financing is being used. Unlike factoring a business will retain its credit control management. Larger firms with credit control departments or businesses uncomfortable with customers knowing their financial arrangements often opt for invoice discounting over factoring.

Asset-Based Lending

Where as with both of the other two previous borrowing options, cash is released against outstanding invoices, asset-based lending will release money against all of the potential assets of a business; this can typically include property, equipment, machinery, stock and even the company brand if valuable enough as well as the usual invoices. This is obviously a way to raise much larger sums and is most often used when there has either been a single event to cause a major cash flow crisis or to fund an expensive venture such as a merger or acquisition.

Efficient and Effective Software for Church Finances

The increasing number of money laundering in businesses as well as charitable organizations today leads to an urgent call for transparency and proper accounting measures. There is a strong need for appropriate software for church finances and other charitable organizations to track the flow of monies for any welfare projects.

Comprehensive church finance software provides a good resource for transparency and accountability that maintains the credibility of the charities. Such software would have relevant features that ensure the proper flow of finances received and expended to be correctly captured and track with detailed and up-to-date reports.

Processing

Good church finance software must be rightly operated by trained and trustworthy personnel. A person of integrity is required to handle the keying in of monies received and expended for a good accountability. There must be an honest treasurer whose responsibility is to receive the collections and deposit them into the bank while the software operator would record the flow of these monies into the church finance software dutifully for a right reporting of the operations for the church.

A well-structured church financial software should have the right features such as easy-to-navigate screens and buttons to assist in the keying in of data to register all monetary transactions and contributions as well as transfers of any funds and gifts received and expended by the church.

The financial software for the church should also include the ability to process standing orders, produce detailed and accurate financial reports as well as link to appropriate bank procedures such as reconciliation.

Accounts Receivable Financing And How It Can Help You

Accounts receivable financing is a flexible form of short term, asset-based commercial financing. Receivables factoring is a common form of this type of financing. In most cases receivables factoring is structured as a sale transaction. It is not a debt or loan transaction. A trading business sells its accounts receivables amount to factoring or invoice discounter firm. This type of transaction may also be referred to as invoice factoring and is a form of asset securitization.

Ownership of the receivables balance is legally assigned or transferred to the factor firm. The transaction remains confidential. In many jurisdictions, there is no requirement to formally advise the debtors of the transaction.

The sale transaction proceeds at a price discounted below the nominal receivables value recorded in the financial books of the trading business. The trading business selling its receivables receives an immediate payment. That immediate disbursement is only a portion of the total value agreed for the receivables. Further payments will be made by the invoice discounter as the receivables are collected.

The price paid by an invoice discounter to a business for its receivables balance depends on a various factors including the average size of the outstanding invoices owed by debtors, the number of customer debtors, their credit rating or creditworthiness, the average length of the collection period, and the average age of the outstanding invoices (the longer the debt has been outstanding the lower the price paid by the invoice discounter).

Compared to banks, factoring firms focus entirely on one asset (the receivables) rather than the whole business. By contrast, the loan approval process of a bank is totally different. They focus on the overall financial performance and credit history of a business, its cash flow and its available security or collateral. Many small-to-medium, early life cycle firms have difficulty in meeting bank lending criteria. They typically have few assets, a weak balance sheet and a no credit history. Provided they trade and have a reasonably large accounts receivable balance, factoring may be a suitable option.

Factoring firms adopt two alternative approaches to the risk of non-payment by debtors (debtor default). These two approaches are reflected in the transaction structure or documentation. Non-recourse sees the factoring firm take on all non-payment risk and no recourse for compensation from its customer, the trading business. Without appeal factoring involves the opposite situation, all debtor risk is carried by the trading business.

In a factoring context, the efficient collection of outstanding amounts from debtors is a critical task. It is an ongoing concern for the trading business keen to maintain a harmonious relationship with customers. If the trading business sells its receivables on a non-recourse basis, over-aggressive collection tactics by the factor firm may result in the loss of customers. For this reason, a trading business may choose to conduct the transaction without appeal.

How Receivables Financing Can Help Service Providers

Receivables financing can be an excellent way for service providers to raise capital for there businesses. Most business owners understand the importance of having good cash flow. Without adequate money coming in, it is difficult for a company to pay their bills or keep operations going.

However, generating capital and keeping it flowing can sometimes be difficult. If a service provider invoices their clients it may take between 30 and 90 days before they receive payment for jobs they have already completed. This can put a strain on a business. Without an adequate amount of capital, they will be unable to meet their own obligations.

The majority of businesses that don’t have enough capital to pay their bills will be forced to take out a bank loan or line of credit. The same is true for companies that are interested in expanding or growing. Unfortunately, bank financing is not possible for everyone. A business that doesn’t have stellar credit, already has too much debt or hasn’t been in business very long may find it very difficult (if not impossible) to obtain a loan. When this is the case, there are often very few options.

Fortunately, one option that it is available to most service providers is receivables financing. Receivables financing allows companies to get the money they need without having to qualify for a loan and take on more debt.

Instead, they sell their receivables at a discounted rate, often times between 70% and 90%, to a factoring company. This company will pay cash for the invoices and then collect them from the businesses’ clients. The same terms that the customer originally agreed to will be those accepted by the factor. After the factor has received the monies for the invoices, they will return them to the company who originally owned them. The factor is then paid a fee, typically between 1.5% and 3.5%.

There are several advantages to receivables financing besides a business getting much needed capital. A factoring service can also act as a collection agency of sorts. They will go after a company’s clients if they are late pays. This can be great for small businesses that do not have a collections department. Factoring receivables is also cheaper than a traditional bank loan.

Companies only pay, as stated above, between 1.5% and 3.5% for the luxury of being able to use the factor’s money. This is generally cheaper then a business loan. Factoring also allows businesses to work with clients and fulfill orders that they might not only be able to afford. In most cases, as long as their clients have good credit, then receivables financing is an option for businesses.

Receivables financing can be very advantageous for service providers. It allows them to get their hands on money right way without the hassle or risk of bank financing.

Factoring – Financing Canadian Receivables With Proper Rates and Structures

Factoring – Canadian receivable financing continues to gain momentum as a financing alternative of choice for Canadian business owners and financial managers. It simply is a case of a common sense approach to improving cash flow and working capital without taking on any debt and at the same time allowing your firm to grow without traditional type financing that might be difficult, or in some cases, impossible to achieve.

In the past many businesses viewed factoring as a high cost financing solution – the reality is that due to a combination of increased popularity and industry competitiveness that rates have improved a great deal.

Canadian business owners considering factoring should also be aware that that they can influence and negotiate rates to a certain degree. One method is to consider your willingness to lock into a one year contract, which in many cases will allow you to lock into a fixed rate that might be, in our experience, 4-6% lower than might be achieved through an open ended term.

Clients ask us what risk or cost is involved in locking into a one year contract – the reality is that most firms considering factoring (also known as receivable financing, receivables discounting) actually do stay with this type of facility for at least a year. Firms that factor their accounts receivable usually have two options at the end of a one year fixed term – either move to a competitive factor facility, or in some cases migrate back to or achieve traditional Canadian chartered bank line of credit financing. While bank financing always has the lower rate the reality is that it in many cases does not provide you with the amount of working capital you need if you are in high growth mode. Alternatively you may also have trouble meeting some of the bank ratio and covenant guidelines that come with those very respectable bank facilities.

We point out always to customers that the largest corporations in Canada and the U.S. in some cases also use factoring type facilities – it simply gives your firm, as well as the large firms, maximum leverage on working capital without taking on debt.

Qualifying for invoice factoring or determining what amount of type of facility you engage is in general a relatively simple process. If clients advise us they have $ 200,000.00 a month in receivable we have found by experience that it is good to build in a growth buffer and set up a 250k – 300k facility, this simply allows for growth.

The amount of your factoring facility and the rate it commands is dependent on three issues -

- the general overall risk profile of your firm – re growth, profitability, type of industry etc

- the size of your total receivables

- the overall customer quality or credit worthiness of your customer base

In some cases concentration also plays a part in your rate and facility structure. Concentration is a double edged sword – you might have a great customer, perhaps a major corporation who in fact is say, 60% of all your business. It’s great to have a credit worthy and prompt paying customer, it is not so great to carry the on going risk of at some point in time losing your one large customer.

If you are having financial or growth challenges it is generally not recommended by finance people that you take on more debt – factoring solves this problem nicely – you are simply liquidating your receivables faster without borrowing.

Seek a trusted, experienced and credible advisor in this niche area of Canadian business financing and assess your factoring options relative to type of facility that meets your growth needs. A factor facility with rates, terms and structures that suit your business model and provide you with all the working capital and cash flow you need is a competitive advantage.

Finance Ministry speaks against offshore ban

The Latvian parliament on February 1 passed in the final reading the legislative amendments banning companies that are registered in low-tax countries, or the so-called offshore countries, from taking part in public tenders in Latvia.

The Finance Ministry, the Procurement Monitoring Bureau and legal experts reviewed the parliament’s decision and concluded that it was inconsistent with the international law.

“One cannot impose restrictions on business activities of a company based solely on its domicile,” Reizniece-Ozola said, adding that it would be different in case of tax evasion or money laundering but the country of incorporation alone cannot be the reason for declaring a company ineligible in public tenders.

The Finance Ministry is working on a report explaining its argumentation that it will ask Latvian President Raimonds Vejonis to consider before promulgating the bill.

“If the President promulgated the law, there will be litigations because those legislative amendments amount to discriminatory treatment of companies,” the finance minister said.

Unity and the Union of Greens and Farmers support the proposal by their partner in the ruling coalition, the National Alliance, to ban offshore companies from participation in public tenders in Latvia but are concerned about the proposal’s compliance with the EU directive.

The Latvian Chamber of Industry and Commerce supports the proposal to ban offshore companies and Latvian companies controlled by offshore companies from participation in public tenders.

Finance Ministry speaks against offshore ban

The Latvian parliament on February 1 passed in the final reading the legislative amendments banning companies that are registered in low-tax countries, or the so-called offshore countries, from taking part in public tenders in Latvia.

The Finance Ministry, the Procurement Monitoring Bureau and legal experts reviewed the parliament’s decision and concluded that it was inconsistent with the international law.

“One cannot impose restrictions on business activities of a company based solely on its domicile,” Reizniece-Ozola said, adding that it would be different in case of tax evasion or money laundering but the country of incorporation alone cannot be the reason for declaring a company ineligible in public tenders.

The Finance Ministry is working on a report explaining its argumentation that it will ask Latvian President Raimonds Vejonis to consider before promulgating the bill.

“If the President promulgated the law, there will be litigations because those legislative amendments amount to discriminatory treatment of companies,” the finance minister said.

Unity and the Union of Greens and Farmers support the proposal by their partner in the ruling coalition, the National Alliance, to ban offshore companies from participation in public tenders in Latvia but are concerned about the proposal’s compliance with the EU directive.

The Latvian Chamber of Industry and Commerce supports the proposal to ban offshore companies and Latvian companies controlled by offshore companies from participation in public tenders.

Be Wiser signs new long-term premium finance deal

The new deal with Close Brothers will see the partnership extended into the 2020s

Close Brothers Premium Finance (CBPF) and Be Wiser have announced the signing of a new long-term deal.

CBPF has been the exclusive provider of insurance premium finance for the customers of Be Wiser for the past 10 years.

But now, with the signing of this new deal, CBPF will provide finance well into the 2020s.

Be Wiser chairman Mark Bower-Dyke said: “In this world of Brexit, new regulation and market instability it is reassuring to know we are partnered by, in our view, the largest and best finance provider.

“Close Brothers Premium Finance are always ahead of the curve with their ongoing innovations, their ability to see the bigger picture and the way they keep our customers’ wellbeing at the centre of their processes. We look forward to working with them over the coming years.”

Sharon Bishop, chief executive of CBPF said: “Be Wiser is one of the best-known brokers in the UK insurance landscape, and Mark is one of the leading names in the industry. We are proud to be working with him and his team, and look forward to continuing this relationship.”

Personal finance: Five ways to make the most of your savings

Working out how to make the most of your savings might not be top of your to do list right now – but it should be. Here are five easy tips to get your savings working as hard as you do.

1. Create a savings plan
You know that savings are important and perhaps you have a figure in mind of what you would like to have in retirement or how much money it is going to cost to put the children through university but you probably do not have a clearly defined finance plan in place.

Approach your plan by considering if your saving aims are short or long-term. If you’re saving for the short-term, planning a luxury holiday or buying a new car for example, you’ll want to have your money somewhere easily accessible such as in a cash ISA.

If you’re saving for a longer-term goal, to help children through university or retirement, you could consider investing in the stock market.

2. Understand investment risk
Your risk profile is the amount of risk you’re willing to take with your money and your capacity to deal with any losses. For example, if you lose some or all the money you invest, what effect would this have on your standard of living?

Every investment has some risks. Putting money in the bank means you won’t experience a fall in your investment. However, you could find that the buying power of your money reduces over time due to the impact of inflation. Putting your money in higher risk investments such as shares and property could potentially lead to higher returns over a longer period but you need to be aware of the risks involved.

3. Choose the right investment
Once you understand your level of risk start to look at your investment options. Do you want to stay safe in cash or go high risk or are you somewhere in between? The most common types of investments are cash, fixed interest, stocks and shares and property.

Cash: We’d suggest that you should have at least a rainy-day cash fund that is easily available for any unexpected expenditure such as a new boiler or if you can’t work for any reason.
Fixed interest investments: These are also known as bonds and generally pay interest for a fixed period. They are mostly considered a lower risk asset than shares.
Shares: There are different ways to invest in the stockmarkets from buying shares in individual companies through to investing in funds. If you want access to shares but don’t feel your nerves can cope with the ups and downs of the markets, you could consider a with profits fund.
Property: Bricks and mortar have been a popular form of investment although they offer no guaranteed returns.
4. Spread your risk
Consider putting your money in a range of assets so that you won’t be dependent on any one type. If there are fluctuations in the stock market and your shares don’t perform as you’d hoped, you’ve still got funds invested in a cash ISA or property for example that may give you better returns. Many funds will also spread investments across different asset classes to diversify risk.

5. Review regularly
Once you have your savings plan in place make sure you review it at least once a year. Not only will this help you to ensure your cash accounts are offering competitive interest rates but you can also review any underperforming funds.

If you’re not sure where to begin with your savings plan or want to better understand the options open to you based on your risk level talk to a financial adviser who specialises in working with GPs. They’ll be able to work through your plan with you, ensure it stays on track and that your money is working as hard as you are.

Racing Awards, Medals and Customized Gear for Runners

Running, whether it be a 5k with the family, a 10k for an extra challenge, or a marathon for the elite runners, can be a very exciting and memorable experience. Running is a very personal sport to lots of people, as it can be great exercise and can make you look and feel very refreshed. Tons of awards are given out to winners at races each year. For people organizing these racing events, finding customized and personal running gear can be difficult, as well as finding unique prizes for running champions. When orchestrating a race, you want to have a memorable competition. Medals and unique prizes can help to make the race more exciting. Participants can keep prizes as souvenirs, and remember the experience better because of a keepsake.
The most important souvenir a competitor can take home is a winning medal. Those are worn with pride, and showed to family members and friends. They are often hung on walls, or shown off where they can be seen. Of course, medals need to be personalized, unique, and specific. You cannot award a running champion with a medal that doesn’t recognize what it’s for. It is often a perfect idea to find a company that will provide you with customized prizes for winners. Often, you can ask for customized medals that include the date, the name of the race, and the name of the company sponsoring and orchestrating the event. That way, when people proudly show their winning medal to others, the people who made the event happen will receive the credit and publicity they deserve.

In addition to medals, running apparel and gear can be a great way to make the race more memorable. Unlike medals, gear is commonly worn and would be used often. Passing out swag, such as customized shirts, jackets, hats, and bags can be a great way to add to the excitement of the race. Races with their own gear are viewed as more unique, as they have customized logos and attractive designs. Shirts can be given out to families, and jackets can be sold at the finish line. Hats can be passed out before the race to keep the sun out of the athlete’s eyes. And, of course, bags can be kept forever and used for multiple occasions. Having the name and date of your race on these items can help to increase publicity and help the runners remember what a successful and memorable race it was. Customizing these mementos can help to define a great race, and will definitely help a race to be more exciting and enjoyable.