eCommerce cashflow


25th October, 2022

Invoice financing: The cashflow option most business owners aren’t aware of

Over a third of businesses are in need of financial support, yet nearly 70 percent are unaware of invoice financing as a viable cashflow management option.

For businesses, keeping the lights on means having a steady flow of cash into the business so they can continue to pay bills, wages and buy new stock.

Strong cashflow means you have capital available when you need it, making it an important feature of any business seeking to sustain operations or invest in growth.

Usually, that means money coming in from sales activity, but when times are tough clients can be slow to pay, causing cashflow gaps to appear.

In fact, an October 2022 survey of 1,000 Australian small and medium business (SME) operators found 39 percent had faced cashflow issues in the previous six months, with 28 percent of those seeking financial assistance and another 28 percent planning to do so in the coming year.

Financial assistance might traditionally come in the form of a business bank loan or may even lead to owners dipping into their personal finances, but the survey also found many SMEs may not be aware of other viable, short-term options.

Expenses mount for Australian small businesses

The SME survey, commissioned by MYOB, found that business operators continue to seek investment in their core business activities – all of which are likely to be impacted by inflation.

Top 4 costs that cause businesses to seek financial assistance:

  1. Buy or upgrade equipment (34%)
  2. Improve cashflow (30%)
  3. Operating expenses (27%)
  4. Wages and supplies (26%)

“Businesses are currently facing really tough financial pressures due to rising costs across wages, energy and fuel and record high purchase costs,” noted Steve Price, Head of Go To Market for Financial Services at MYOB.

“We’re looking at the highest quarterly wage increase in ten years, with our recent research showing over half of Australian SMEs have increased salaries in the past year, while raising employee pay is a priority for four in five businesses.

“Adding to these pressures is the fact that small businesses often have to navigate late payments from customers which can really impact their cashflow.”

Cashflow issues can be seasonal, sudden or relentless

Price also underscored the importance of cashflow support to get through seasonal troughs in revenue or slower-than-usual payment times.

“The upcoming holiday season is renowned for being the time of year SMEs face the slowest payment times on their invoices, so keeping a steady hand on cashflow is key to helping a business survive in this climate.”

Planning for a shortfall is one thing, but when a gap in your cashflow arises unexpectedly, access to support needs to be fast, and the survey also found 32 percent of respondents prioritised the immediacy of available financial support when choosing between available options.

Nearly three quarters of business (74 percent) surveyed for the MYOB Business Monitor in June said when they need cash they need it straight away, while over half (54 percent) said by the time funding from a bank or financial institution is approved, their cashflow issues are already resolved.

Some industries face sudden delays on payments year-round, such as the building and construction industry – a sector that’s faced significant issues through the year.

CEO of Master Builders Australia Denita Wawn says that sudden cashflow gaps for construction businesses can be debilitating for the business operators involved.

“Our industry unfortunately deals with long waits between providing work and receiving payment due to contractual arrangements,” said Wawn.

And the research corroborates Wawn’s comments, with half of construction business respondents indicating they’ve experienced cashflow issues in the past year.

“This can really hamper construction businesses’ ability to maintain a steady cashflow, especially now when they’re facing such record price increases due to supply and labour shortages.

“If you’re needing to order more materials or pay additional wages in order to complete a project but you’re still waiting to be paid yourself, knowing how to smooth over the interim cashflow gap could be a deal breaker.”

Little-known invoice financing: New option for plugging the cashflow gap

Invoice finance is a non-traditional cashflow management option that has appeared in recent years as a viable alternative to small, timely loans.

With invoice financing, businesses can access the amount due on an invoice as soon as it’s sent, avoiding any delays between supplying a service or product and receiving payment.

It’s all about gaining access to money that’s due to come into your business, faster.

Trouble is, it seems most SME operators aren’t aware of it.

READ: Introducing invoice financing

Sixty-eight percent of businesses surveyed have never heard of invoice financing, according to the survey. At the same time, 71 percent confused it for another type of financial assistance.

Just 15 percent of respondents had used invoice financing before, indicating this type of financial assistance could help many more businesses than it currently does.

MYOB’s Price agrees.

“The lack of awareness signals that at a time when SMEs are feeling the pinch, many could be missing out on a fast and effective way of easing cashflow shortfalls,” he said.

“It’s so important that SMEs understand what cashflow management tools are suitable for them, which is why our business management platform directly links businesses with fintechs such as Butn.”

Better cashflow management just a click away

Upon learning more about invoice financing, 58 percent of SMEs surveyed thought it could be an effective option for them and 53 percent indicated they’d consider using it in the near future.

“Cashflow management and access to cash is a critical enabler for SMEs,” explained Butn CEO, Rael Ross.

“Companies seeking ways to handle cashflow or find the capital they need to fund a transaction are often unaware of the financial options available to them to secure the cash they need, when they need it.

“Butn seeks to change this by supporting SMEs and sole traders with an embedded finance solution that is direct, fast and allows businesses to seize on opportunities that otherwise would not have been available to them.”

MYOB’s partnership with Butn means invoice financing is now available to MYOB customers in Australia, providing them access to a secure, low-risk and affordable cashflow solution all in the one business management platform.

“Our partnership with Butn is part of our commitment to providing SMEs with a complete view of their business so they act and adapt as they need, with confidence,” said Price.

“With our business management platform SMEs have the ability to assess their operating costs, stock levels and payroll against their current and forecasted cash position, what invoices are upcoming or outstanding, and access funds from these invoices – all in the one place.”

Tomorrow’s invoices paid today, with invoice financing. Find out how it works.