Does this fear stop you from solving cash-flow challenges?
What will the customers think?
That’s the first question savvy business owners ask themselves any time they are going to introduce a new process with a large client. Managing relationships is a major concern, and any change must always be considered and communicated carefully, particularly one that deals with how payments are made.
With the rapid growth of innovative funding methods among small businesses, that question is coming up more and more. Invoice funding services, like the Canadianbased FundThrough, are helping fill a very real need in the market for businesses that sell to good-paying customers but are waiting 30, 60 or 90 days after fulfillment to get paid. For most business owners, having to wait on those payments can put a real strain on their cash flow when it comes to operations and managing growth. Services like FundThrough eliminate the wait by allowing a business to access those funds whenever they need it and with one click. FundThrough can advance up to 90 per cent of the invoice value within 24 hours, creating instant working capital to fuel growth and eliminate any cash-flow worries. And, it’s working. FundThrough is now funding millions of dollars in invoices for Canadian business owners every month.
While many business owners are enjoying this newfound “freedom from the wait,” others are hesitant to make the move because it often requires that business owners notify customers that they are assigning their invoices over to the invoice funding service. It’s the key piece of the equation that allows these types of lenders to advance the funds so quickly. The business owners instruct their end customers to send the funds to the invoice lend- er and the lender can advance the amount to the businesses right away, knowing they will ultimately receive payment from the end customer. The end customer still pays, the businesses gets the payment when it’s needed and the lender earns a small fee for making it happen. Everyone wins.
Still, some business owners fear how a change in payment may look to their larger customers. “The reaction of many of our clients is that they worry about their customers thinking they have financial difficulties,” says Steven Uster, CEO of FundThrough. “But, to the large customers, they think it’s a great thing. They are not concerned about how a small business funds itself, they just care about getting the promised goods and services on time.”
“If you’re using this service, it demonstrates you’re a prudent manager of your cash,” Uster says. “It shows that you’re managing your cash flow to your greatest advantage.”
What l arge businesses want from the small businesses they work with is to know the relationship will be hassle-free, he adds.
“They look for stability and predictability: They know that if they forecast they can sell 100 units over a certain period of time that you can fulfill that need,” he says.
“For example, the worst thing a retailer could do is buy something from you that is popular with its customers and that sells out, and it can’t re-order more from you because you don’t have the financial wherewithal to fill another order quickly.”
In fact, Uster says most large firms are familiar with a variety of funding facilities, including invoice funding services, thanks to previous experience through relationships with other businesses.
“Larger customers deal with third- party funding sources all the time because they deal with many small businesses and they understand the way the system works.”
Uster adds many large businesses also have a mandate to build relationships with small businesses so they understand who they’re dealing with as well as the challenges those smaller enterprises may face.
“They know you’re a small business and that’s one reason why they’re dealing with you.”
More than anything, using tools like an invoice funding service assures large clients that a small business can deliver the goods.
“It gives them comfort that you can fulfill your obligations,” he says. “It shows that you’re not flaky and fly- bynight and, instead, you’re addressing the concerns of your business.”
Consequently, large firms can confidently forecast their needs for a good or service.
And that’s good for everyone’s bottom line.
“If you’re using an invoice funding service, they know are going to be able to deliver,” Uster says. “And that means they’re likely going to buy more from you.”