Invoice finance hacks to protect your supply chain before summer demand spikes

While summer can be a profitable time, it can also put pressure on your supply chain – stretching supplier relationships and impacting cash flow. Businesses that aren’t ready for the spike could miss out on sales due to stock shortages, leading to less financial growth or unhappy customers from unfulfilled orders. 

However, at the same time, taking out more debt may not be the answer. After all, while spikes do often happen, they're unpredictable. If you experience less revenue than expected, you may be left with unused stock and a working capital hit. 

Enter: invoice finance. 

Instead of relying on loans, overdrafts, or business credit cards, invoice finance gives you access to capital you have already earned. This can help you move faster on deals with suppliers, order a larger amount of stock, and manage cash flow without taking on unnecessary debt. 

Here’s how you could use invoice finance to support your supply chain this summer. 

What is invoice finance?

Invoice finance gives you access to the cash tied up in unpaid invoices early. Instead of waiting the standard 14, 30, and sometimes even 60 or 90 day payment period, invoice finance involves a lender forwarding this cash to you in advance.  

The two main types of invoice finance 

There are two core types of invoice finance, invoice discounting and invoice factoring. Here’s the difference between the two. 

Invoice discounting 

Invoice discounting essentially involves using an invoice as security for a loan. With discounting, you keep control over your relationships with your customers and over the collection process. The lender offers you an advance against your outstanding invoices, but the client doesn’t need to be informed. 

Benefits: Discounting is more suitable for businesses that want to keep control over their communications and collections processes, given that the end customer is unaware of the agreement. 

Risks: Discounting does sometimes require that the lender checks your credit score, rather than your client’s. Remaining in control also means you remain responsible, which means you’re the one who has to chase up clients and collect funds. 

Invoice factoring 

Invoice factoring is sort of like selling your invoices. Here, the factoring company takes over the collections process, which means they're often in direct contact with your customers. 

Benefits: Outsourcing your credit control process could save you time and reduce your administrative burden. Plus, the factoring company may check your client’s credit score rather than yours, which, if you’re a smaller or newer business, could help make it easier for you to qualify. 

Risks: The core thing here is that you lose control over your communication with your customers regarding credit. This could have an impact on your wider relationships with them. Factoring companies could also use methods to retrieve ‌funds that you might not have chosen to use, if you were still responsible. 

Invoice finance hacks to support your supply chain 

Here are some ways you can use invoice finance to support your supply chain this summer.  

Focus on high-value invoices 

Focus on using invoice finance on larger invoices. These may be quicker to fund and could provide an immediate boost to your cash flow, which could help you cover important urgent payments and purchases. 

Manage risk 

Summer can bring unpredictability, including logistical challenges due to sudden shifts. Setting up an invoice finance facility before you‌ need it can give you the flexibility to use it quickly when unexpected opportunities or challenges present themselves. 

Consider selective invoice finance 

Using your entire ledger for invoice finance could be unnecessary. Selective invoice finance enables you to choose which invoices you use for funding. You could decide invoice-to-invoice and client-to-client in a way that works in line with your true cash flow needs. 

Negotiate discounts 

You could use the cash from invoice finance to pay suppliers in advance and in bulk. Some suppliers may offer early payment discounting, which could help you save money and improve your profit margins. 

Build an emergency fund 

Even with all the preparation in the world, supply chain disruptions can happen. You could choose to use invoice finance to help you proactively build a cash reserve, which you could use if you’re caught off guard by any surprise delivery fees, cost increases, or unexpected emergencies. 

Fund growth 

Invoice finance doesn’t just have to be a tool that can be used for short-term cash flow gaps – you could also use it to fund growth. You could do this by expanding your marketing initiatives, hiring a sales team member, investing in R&D, or upgrading your operational technology and equipment to be more efficient. 

Better logistics options 

You could use the funds from invoice finance to pay for faster shipping or invest in a wider range of logistical partners. In times of urgent need, this could spell the difference between getting stock on shelves in time and disappointing customers. 

Support last-minute orders 

Seasonal spikes can sometimes lead to unexpected large orders, or last-minute orders from customers. While this can be an opportunity for growth and revenue, it could also put a strain on cash flow. Invoice finance could help you meet these order obligations. 

Find invoice finance with Funding Options by Tide

We help connect eligible borrowers to our network of over 120 lenders offering between £1,000 and £20 million. Whether you’re looking for invoice finance or something else, like a bridging loan, commercial mortgage, or merchant cash advance, our team of experts is here to help you understand your possible options. 

We’ve connected more than 21,000 happy customers to over £950 million in funding. If you want to be next, submit your details using the link below and our experts will be in touch to let you know if you’re eligible. 

Find invoice finance.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.