An Accountant’s Guide to Invoice Finance for SMEs


Ask an accountant what his or her work entails – and the chances are the answer will be: “Where do you want me to start?”

Of course, the ability to crunch numbers is certainly going to rank highly. But that would be to completely over-simplify the job description.

In this day and age, accountants are often expected to demonstrate a range of skills and business acumen that go way beyond the traditional disciplines of preparing financial spreadsheets and tax returns. An equally important element of the service is to make recommendations or offer ideas that will assist businesses in the pursuit of growth.

This is especially true of the burgeoning SME sector of the economy, where there appears to be a real appetite for expansion. As a result, there is now a greater than ever need for finance to fuel business progress and momentum.


Indeed, recent statistics from the National Association of Commercial Finance Brokers (NACFB) have revealed that:

  • over the past year, lending to SMEs has exceeded the pre-recession high of 2007
  • this is the seventh consecutive year that total lending to small businesses has grown

The commercial finance sector is booming and, clearly, much of this is being driven by the demands of the hungry SME sector.

But where is this additional finance coming from and what is it being used for? Without doubt – and increasingly, we are seeing this to be the case – there is a growing requirement for invoice finance for small businesses. Certainly not because these businesses are struggling – quite the opposite – more often than not, because they are experiencing the challenges associated with business expansion.

Not surprisingly, the NACFB stats also reveal, that during 2016, invoice finance lending, amongst their members, increased overall by 22.8%.


The Benefits

It’s easy to see why invoice financing can be such an attractive option for SMEs, providing:

  • a quick and simple access to cash owed by customers
  • a short-term rolling cash flow boost without resorting to traditional debt
  • a means to facilitate faster business growth

At the same time, this can create a value-add opportunity for accountants.

Invoice finance in all its guises – be it factoring, confidential invoice discounting or selective single invoice finance – is designed to free up hard-earned cash hidden away in unpaid invoices. This can be a nightmare for any expanding business with a growing order book where cash flow is king. And no sector is immune.

From engineering to recruitment, logistics to construction and manufacturing to printing, for companies to have an efficient invoice financing facility in place, it can be hugely advantageous.

Put simply, invoice finance advances payment terms to 24 hours, even same day potentially – whether those terms be 30 days or even up to 120 days. Instead of the business having to wait the allotted credit time (or longer in the case of slow payers), to be paid, they can receive up to 90% of the invoice value immediately the invoice is raised. This arrangement can continue for all subsequent invoices or as each business wishes to select.

As a result, business expansion ceases to be a slave to poor cash flow, additionally depending on the product selected, businesses can choose to subcontract collecting outstanding monies and or elect to protect against bad debts wholly or on a customer by customer basis. Ultimately, this can release precious resources to focus on doing business rather than being side-tracked in the pursuit of recalcitrant debtors.

From our many years of experience working with industry professionals and financial intermediaries, we believe it’s increasingly important for them to understand the early warning signs from their clients so that they can seek specialist help. That’s exactly where Partner Commercial Finance fits into the picture.

We have decades of combined experience working with accountants – and their clients – providing effective all-round business finance solutions, with a specialism in invoice finance and that can make all the difference to an SME’s success. The objective is to ease any cash flow peaks or pressures to aid the smooth running of the Company and assist in maintaining good business-to-business relations.

We’ve been around long enough to have heard all the reasons why invoice finance might not offer a realistic solution; that it could damage a company’s relationship with its customers if a third party is chasing for payment; that invoice finance is expensive; and that it may adversely affect the company’s image.

These are all common misconceptions.


Better Access to Finance

For many businesses, seeking additional bank finance, or increasing an overdraft facility, is a complete anathema and actually can be counter-productive when what’s really needed is access to cash which has already been earned!

So it can be incumbent upon an accountant to be aware of these issues. It’s often during a period of expansion, when sales are increasing and thus generally so are outstanding book debts, that a Company’s need for invoice financing becomes most apposite.

Having funds to hand to cover existing and additional staff wages, materials and even transport costs, can all be key reasons why invoice finance for small businesses is the route to take. With readily available cash, it might also provide the opportunity for the client to settle a payment early with a supplier, in order to obtain a discount, which is where invoice finance comes into its own.

The amount of extra cash generated from the timely settlement of invoices can far outweigh the additional costs of ramping up a bank overdraft, with all the associated arrangement fees, interest charges and inevitably these days, increased security requirements. This penalises the business instead of rewarding it.

Invoice finance provides better access to finance – or to put it another way – rightful access to the company’s own money.

A good accountant will always want to go the extra mile for their client, deriving real satisfaction from seeing a business thrive. This will often come from a deeper understanding of the company’s activities – being a confidante and hand-holder – not merely a producer of data on a balance sheet.

It’s no surprise, therefore, that we are being approached by a growing number of accountants who have clients needing invoice finance – as well as business owners who have been advised by their accountants to approach an independent specialist in this sector for the self-same reason.

So if you are an accountant with clients who are currently experiencing growing pains – linked to funding needs – then Partner Commercial Finance is here to find solutions to unblock sclerotic cash flow.

As a hard-working professional, think of it as all being part of the service you provide, in partnership with Partner!


Partner Commercial Finance provides more detail on this. Follow the link to our Invoice finance page for more information, or contact Kevin or Tim today.

Back to News

No Comments

Add your reply

Your email address will not be published. Required fields are marked *