How a Transporter benefits from Invoice Factoring – a case study
Invoice Factoring is a way for a business to fund cash flow by selling their invoices to a third party – a factoring company like Finrock Capital, at a discount. It’s important to remember though that Invoice Factoring is not a loan. You sell your invoices at a discount to a factoring company in exchange for a lump sum of cash. The factoring company gets paid when it collects the invoice from your customers, typically in 30 to 90 days.
Invoice Factoring is said to have many benefits and this is true, especially for businesses who have hefty costs or long manufacturing periods to bear, to be able to deliver on their services. This article looks at a typical case study relating to one industry in particular, which is the transport businesses – or Transporters.
In for the long haul
These businesses typically have to invest a large amount of money on fuel (almost always diesel) to enable them to deliver on their loads but then often still wait a significant period to get paid. Sometimes, due to a lack of cash flow, they are financed by their customers for the diesel they require but this is always at an additional cost, so ideally if they have the cash flow they can buy diesel from the cheapest source.
A typical Invoice Factoring scenario therefore would be that the Transporter applies for and is granted an Invoice Factoring facility, which pays them 75% of their debtor’s book, enabling them to buy the diesel and deliver the goods. At that point, they provide Finrock with the invoice and POD and Finrock finance up to 75% of the invoice value.
A bouquet of services
Finrock also provides a number of additional services to the Transporter like debtor administration and following up on the invoice (watch this space for our next article on additional services provided by Finrock). The invoice is paid to Finrock, from which the 25% balance is paid to the transporter, less their fee.
The benefits to the transporter
Now we get to those all-important benefits! So in what ways has the transporter benefitted by contacting Finrock Capital to get invoice factoring facilities?
> They have been able to access their diesel at cash prices.
> Sales and number of loads are no longer limited because of cashflow.
> More loads can be completed without having to worry about diesel and toll costs.
> Once a delivery note and invoice are provided, payment will be made by Finrock. This certainty of when you will be paid provides not only cash flow but peace of mind!
> They have also benefitted from a fully outsourced debtor administration service, so no more worries about chasing up outstanding invoices.
> Their profits increase! Sales can increase exponentially with access to diesel.
> As the Transporters fleet increases there is cashflow available immediately to cover diesel costs without having to wait for 60 + days to receive payment. This means the company can grow unhindered.
Consult the professionals
This is just one case study based on one industry example, but remember every business, both big or small, can benefit from Invoice Factoring in just as many ways. With all the additional services thrown in too, dealing with Finrock Capital is a no-brainer!
Talk to us today about your cash flow issues and let’s see if we can make sure you have the peace of mind of knowing your working capital is kept intact and your cash flowing!
