The average invoice payment in Ireland is 62 days, according to the Small Firms Association. According to a survey by the equivalent body in the UK, 50% of small businesses has written off an invoice valued between £10 and £9,999.00 in the last 12 months.
Frightening statistics if you are trying to manage your cash flow to run your business. Cash flow is the life blood of your business, slow payment results in STRESS. That’s a given but it also:-
- slows the business growth
- creates difficulties in paying wages
- you spend unproductive use of time chasing late payments and debts
- you have difficulties paying suppliers
- restricts your marketing budget
“Getting paid on time is a never ending problem for small businesses. Late payment causes serious cash flow problems; requires firms to extend overdraft facilities and consumes a great deal of management time.” Avine McNally, Acting Director, Small Firms Association.
Get your Invoice Payments Faster
While trying to solve our own payment issues, I came across a company in Dublin that have brought two new invoice payments solutions to the market, the company name is C.B.D.S. Ltd. They are aware of these products being used in the US and the UK and are introducing them to the Irish market.
These two invoice collection solutions are called, Invoice Payment Guarantee (IPG) and Progressive Cash-Flow Acceleration (PCA). Both solutions encourage your customers to make the invoice payments within 30 days.
- Currently 60% of all invoices are paid in 30 days.
- What these solutions do is bring that 60% up to between 80% and 90%.
- Generating between 20% and 30% more cash in your bank account inside 30 days; and
- The IPG 100% guarantees you never have a bad debt again, happy days.
Your business pays a fixed percentage fee per invoice for either solution and the slow paying clients pay penalties to the collection company as they are the ones chasing them for your payments. These penalties are legal under “The Late Payment in Commercial Transactions Law” passed into Irish law in March 2013, which allows companies to charge interest after 30 days.
If one of your clients, being managed by CBDS under the IPG solution, has not paid an invoice by 179 days, CBDS will write a cheque for the amount of the invoice and lodge it into your business bank account on the 180th day, thereby guaranteeing you against any bad debt.
Mark Halliday the CEO of CBDS answers some questions about what motivated his location of these two solutions and how they work for his clients benefit.
Explain your motivation for bringing these solutions to the Irish Market.
We could see businesses struggling with Debt Collection and managing their cash flow with no help from the banking industry for the last 6 years. These two solutions have being operational in the US and the UK under one guise or another and we felt they could help businesses to take advantage of the of the improving Irish economy. As well as the stats mentioned above in your intro we believe that the increased 30 day cash-flow allows you to:-
- Free up your scarce time to manage your business
- Reduce your staffing costs in the accounts department
Chasing money is a cost to all companies and the profitability of an account drops of a cliff when the invoice heads into 60 or 90 days plus. The IPG solution allows some extras which may not seem apparent,
- You could increase credit to your clients
- Put more sales people on the road
- Open more new accounts
Over the last six years due to the depression, businesses have pulled in their credit terms, they have being unwilling to give credit, due to the risk involved. We all know the banks are unwilling to lend despite their claims to the contrary, the IPG in particular allows a credit stream re-open. All the client has to provide us with is:-
- Proof of business address
- Phone numbers
- Initial credit check reference
What are the costs for these two solutions to your clients?
Both solutions have a flat rate charge with no hidden extra’s, the PCA fee is 4.5% and the IPG fee is 6%. We do not have a yearly fee or draw down charges just the fixed percentage fee. Once our client hands over the account with the 3 pieces of information listed above they pay no more than the agreed fee. Their customers pay penalties if they are late paying, these penalties are:-
- 15% on day 31
- 22.5% on day 61; and
- 30% on day 91
If we fail to collect the invoice by day 179 we have to pay the invoice amount in full to our client on day 180 under the terms of IPG solution, thereby guaranteeing them against bad debts. As you mentioned in your intro, the customers are anxious to avoid the penalties, which are supported by Irish Law, clients cash flow jumps from 60% paying on time to over 80/90% paying within 30 days.
How do your fees compare with other finance solutions presently in the market?
The main products in the market place is invoice discounting/factoring from either the banks or specialist invoice discounting companies. From our research we believe their charges to range from 12.5% to 20% depending on the company or bank. They have a combination of yearly fees, plus a draw down fee per transaction and other charges depending who you do business with. The other major issue revolves around an unpaid invoice.
For example you have a €10,000 invoice you need to finance, you will get a percentage of this invoice 80% maybe 85%. So you draw down that €8,000 from the company/bank and you use this to manage your cash flow over the next three months, then the invoice goes unpaid by your customer, you have to repay the €8,000 and you have to still chase the unpaid invoice yourself, neither the company or bank will help with that.
Other options are increasing your over draft or a bank loan, good luck with both of those.
Does the client have to hand over the management of their entire customer portfolio?
We would be delighted if they did but we understand that clients will have customers they deem to sensitive to hand over to CBDS. That is not an issue for us we are happy to manage all or part of the invoice ledger and as we build our relationship with our client they may feel happier to let us deal with all their customers. We have a 12 month contract with a 5 month get out clause, which is a comfort to clients when signing up.
If you have any questions for Mark Halliday please do leave a comment below.
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