A healthy cash flow is imperative to the ongoing success and growth of any business and in today’s economic climate, businesses need to take every opportunity to maintain their cash flow where possible. If you are a business that uses invoices to bill companies, you may fall subject to the long wait of repayment terms, meaning it could take months for them to settle what they owe to you. This can leave cash flow strained and suppliers left unpaid.
For bodyshops who invoice insurance companies, you can also be left waiting up to 60 days or more to get paid for the work you undertake, however, this is where invoice financing can help and also how selling your invoices for their full value means you can get access to your money in as little as 24 hours.
Let’s delve a little deeper into how invoice finance can benefit bodyshops, specifically those who invoice insurance companies.
What is invoice finance?
Invoice finance is a form of business funding that allows businesses to manage their cash flow by bridging the gap between the point at which a sale is made and the time it takes for the payment to be received from the debtor. If you are a company that relies on credit terms, you will know too well the wait that is undertaken for an invoice to be paid and the strain this puts on your cash flow.
In today’s economic climate, some companies take advantage of the full repayment terms, meaning that it can take months for them to settle what they owe. Invoice Finance releases cash tied up in outstanding invoices, allowing the supplier access to money before the customer has paid.
Invoice financing can be a useful tool for the business-to-business sector, which rely on a regular inflow of cash to allow them to operate. It ensures that capital is available to pay wages and bills on time and that control over the business is maintained.
For bodyshops that invoice insurance companies, invoices can be sold to an invoice finance company for the full amount, less a small service charge, and you will have access to the cash within 24 hours. Repayment is always linked to the invoices you raise, meaning repayment is always in conjunction with you having made a sale.
How can invoice finance work for bodyshops?
Invoice finance for bodyshops that invoice insurance companies works by completing the job – usually crash repairs – raising an invoice to the insurance company and submitting documents to the invoice finance company to complete the transaction. You will then have access to the full value of the invoice, less a small charge to the lender, the following day.
The invoice finance company will take on the task of recovering your money from the insurance company when it’s due meaning that your involvement in the process is limited, leaving you to get on with the running and growth of your business.
Protection against bad debt is provided , subject to the facility being non- recourse, once the invoice is sold and the responsibility of the payment then falls onto the finance company if the customer fails to pay or takes extended credit.
The fees involved in this type of business funding are usually small in comparison to the protection your business will see. Fees are typically 1.5 -3% of the invoice value and there are no other charges, set up, or renewal fees involved, meaning that you can get at least 97% of the invoice within 24 hours of submitting.
Interest is paid at a sum above base rate on the balance outstanding for the period its outstanding.
Benefits of invoice finance as a form of business funding for bodyshops
The main benefit of invoice finance for bodyshops is that you can get access to the cash you are owed from insurance companies immediately, meaning that you can complete repairs and continue work that will move your business forward. Here are some of the ways in which invoice finance can benefit your bodyshop business:
- Immediate access to cash, without the long-term implications of a traditional loan and the debt that comes with it.
- At least 97% of the invoice fee is paid within 24 hours with no other charges.
- No risk to your assets as invoice finance is an unsecured business loan, meaning that you won’t have to offer up physical assets as collateral.
- Bad debt protection means that if the customer doesn’t pay, the business finance company will take on the task of chasing up, and you will have already been paid regardless.
- Supports your business growth by allowing you to pay suppliers, wages and labour costs immediately, maintaining a steady cash flow and freeing up time that would be spent chasing debtors, allowing you to focus your energy on marketing your business.
How PMD can help with invoice finance for your bodyshop business
If you own a bodyshop and are feeling the constraints of access to payments from insurance companies, speaking with an experienced business finance facilitator can really help set you on the right path.
PMD has been securing invoice finance for their customers for years and we work with businesses across all types of sectors to help facilitate their growth. PMD has access to over 50 invoice finance companies and our dedicated team will take the time to understand your business and find the right funder to support your growth plans.
Also, if you already have an existing Invoice Finance facility, PMD can benchmark this against what is available in the market and improve on this by either reducing costs or increasing funding, and in many cases both.
If you’re interested in invoice financing and would like to discuss this further, contact PMD today for all the information and advice you need.