Let’s start with the basics; an Invoice is a document sent to a customer (aka Debtor) specifying payment details for products or services provided by you / your company.
An invoice with credit terms gives rise to accounts receivable due 30, 60, 90 or even 120 days. This potentially leads to cash flow issues for the supplier. Many savvy businesses today opt to utilize their accounts receivable and sell unpaid invoice to finance their companies by:
All the above allows businesses to obtain immediate cash flow necessary to meet their current and immediate cash demand.
There are many advantages when you sell unpaid invoice, some of the benefits are:
On the other hand, there are stigmas associated with companies that sell unpaid invoice or undergo debtor financing. Some see this as a potential sign of poor receivables management or credit control whilst some may associate this to a company who may be financially strained.
These stigmas are beginning to fade. Invoice financing is one of the most commonly utilised finance solutions for SMEs. Businesses across the world factor €2.37 trillion in a single year. In the UK, over €376 billion of client sales were factored in 2014. In Singapore, there has been a steady increase in factoring over the last 7 years with €37.8 billion factored in 2014 alone.
For business to sell unpaid invoice for cash is a universally accepted tool that is essential to effective cash flow management for SMEs and is a key to business continuity and business growth.
Nalinee Chinowuthichai is the co-founder of InvoiceInterchange, Singapore’s invoice trading platform, where SMEs can flexibly manage their cash flow by selling invoices to a network of investors who compete to provide cash advances.
 Factors Chain International, Statistic, searched on 7 May 2015
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