Invoice Financing: Here’s Why You Should Take Advantage of It

“We cannot do anything to change how we use credit terms in business. However, there is something that we can do with unpaid invoices.

We call it invoice financing.”

A study done by the largest credit insurer in the world revealed that Singapore has the highest number of unpaid invoices in the Asia Pacific countries. This poses a great challenge to the businesses in Singapore as late payment will cause their cash flow to be affected and leading them into debt and bankruptcy.

Therefore, with invoice financing, businesses have the option to sell their unpaid invoices to financial institutes at a discount. This enables businesses to improve on their cash flow even though the client’s payment for the invoice is still 60 or 90 days away and allows them to receive funds immediately. With improved cash flow, businesses can offer better payment schedules to their clients and in a way keeps their company competitive as it attracts more clients.

Moreover, invoice financing also helps to keep the credit low and hence businesses do not have to worry about their debt level is too high to borrow a large business loan.

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E-invoicing initiative in works to help businesses get paid faster, enable better planning

During the Budget 2018 speech earlier this month, Finance Minister Heng Swee Keat announced that e-invoices could soon come into play for SMEs in Singapore. This initiative could help establish a framework to support small-medium sized companies in terms of productivity and managing their cash flows.

As Singapore move towards the digitalisation of operations, e-invoicing can help SMEs reduce operating costs, speed up transactions, minimise disputes and reduce errors. MCI also stated that it will be different from existing, digitised invoices and scanned invoices which still requires some level of human input to process. A 2017 US Federal Reserve Study indicated that 92 per cent of e-invoices were paid on time compared to 45 per cent of paper invoices.

This would mean that with e-invoicing, SME owners have better control over their payment cycles, resulting in better cash flow management, greater sustainability and growth for the business. Continue reading