Why Achieve this Several United kingdom Enterprises Use Invoice Finance?

Apr 20, 2012 by HaleTasia842

New figures through the Asset Based mostly Finance Association report that as at September 2009, just 42,983 United kingdom companies use invoice finance offered by means of their membership. This represents just 0.73% in the overall amount of Uk enterprises at this time detailed in Dun & Bradstreet’s Marketplace of United kingdom Enterprises Database.

In order to try and find out the reasons for this low take up of invoice financing, we commissioned a piece of research that involved telephone interviews with 100 SMEs (Small & Medium Sized Enterprises) to better understand their attitudes to invoice finance.

We asked those companies:

“Why do you think that so few firms within the Uk use invoice finance?”

Research Results

The results were as follows:

41% said due to cost.

31% said that it was not promoted enough and companies hadn’t heard of it.

18% said it was easier to use overdrafts or loans.

10% said it was due to the bad reputation they associated with making use of the products.

Those are interesting answers as they demonstrate how poorly promoted these products have been, and how widespread misunderstandings about these products are.

Analysis of Those Results

Taking each response in order, there are some key points that corporations seem to have misunderstood.

41% – Cost

We recently constructed and published a factoring savings calculator that demonstrated how a business could use factoring (a form of invoice finance) and achieve savings that would more than offset any fees incurred and could create a net cost reduction to the business. These savings are made possible as a result of utilizing the outsourced credit control function that comes with factoring and by seeking supplier discounts for cash payments made possible by the cash released from factoring.

31% Not Promoted Enough / Hadn’t Heard Of It

This lack of promotion of these flexible working capital products, by the invoice finance industry, is clearly something that is contributing to the low take up of these products and the lack of understanding about how these facilities work.

18% Easier To Use Overdraft Or Loans

There are several points to consider here.

Firstly, the quantity of work required of a client to run some invoice finance facilities is absolutely minimal. There are products within the market that have eradicated the need for reconciliations and technological developments mean that invoices can often by uploaded electronically, and automatically, straight through the client’s sales ledger package. The client can even choose to have cash transferred to their account as it becomes available so they don’t even have to request it.

invoice finance
factoring