When you want to grow your business, good cash flow is crucial. However if you have a number of unpaid invoices,, your cash flow is going to suffer. Invoice discounting is a way you can improve your cash flow without having to wait weeks or months for invoices to be paid.

What is invoice discounting?

Invoice discounting is one type of invoice financing that can be used to free up cash flow. It effectively allows you to sell invoices, giving you immediate cash when you need it, not when your customer is ready to settle their invoices.

How invoice discounting works

If you want to utilise invoice discounting to improve your cash flow you can follow the below steps:

  1. Raise an invoice. As soon as your business delivers goods and/or services to a client or customer, raise an invoice. It can be either a tax invoice (inclusive of GST) or a basic invoice (without GST).
  2. Submit the invoice to your chosen financier. If you would like to convert the invoice into immediate cash, , choose a financier that provides invoice financing services. Submit the invoice, along with any required supporting documentation, to the financier. This step is akin to selling your invoice.
  3. Claim your advance. The financier will usually pay you an advance of between 70% and 90% of the value of the invoice within 2-3 days less a small fee. Some financiers can even provide you same day draw downs.   Claim the remainder of the invoice. When your customer or client pays the invoice, the financier will then disburse the remaining balance (10% to 30%) of the invoice value, minus the discount fee (interest) to you.  .

How InvoiceInterchange can help your business

In 2018, maintaining good cash flow is still one of the biggest problems faced by small businesses in Australia. If your business is experiencing cash flow challenges , invoice financing may offer the quick and flexible solution you need. Here at InvoiceInterchange, we offer high-quality invoice financing products that can be tailored to your business’s needs. Get in touch to learn how InvoiceInterchange works and find a solution to your cash flow crunch.