Invoices are strongly tied to small and medium-sized enterprises (SMEs) cash flow. These documents are sent to customers; they outline details of the transactions including the amount owed and the payment terms. It also represents the amount of inventory or effort leaving the SMEs’ books. A large number of outstanding invoices at any given time is bound to significantly impact the SMEs’ cash flow. It’s no secret that effective management of these invoices is mission-critical to the SMEs’ survival. 

Late payments no doubt leads to cash flow issues. 

Sure, an SME may negotiate the settlement of the invoice. Among the steps often taken is restructuring the payment. After all, incremental payments are better than no payments. But this also means that cash flow will be sluggish. It becomes difficult for these SMEs to meet their obligations and overheads – what more to say focusing on growth. A large amount in the accounts receivable (AR) ledger isn’t always good. This money needs to flow from AR into the SME’s bank account! 

One solution which SMEs can consider now is tapping into invoice financing facilities. Invoice financing allows businesses to quickly access funds, improve their cash flow, and reduce the stress caused by late payments. 

Limited access to traditional financing.

In January 2023, Malaysia’s overnight policy rate (OPR) was retained at 2.75%. Yet, OPR is not the only thing that influences financing by financial institutions. Traditional financiers are treading cautiously despite Bank Negara Malaysia (BNM) Governor’s assurances that Malaysia is unlikely to go into a recession this year. That does not mean that requirements are not more stringent. Apart from that, SMEs may not want to commit themselves to unnecessary long-term financing as they find their footing in the post-COVID-19 recovery period.

A viable short-term alternative is to utilise invoice financing facilities. This provides SMEs with a flexible alternative that they can use as needed. A shorter financing period also means they would not have to keep the facility on their books longer than necessary.

Growing pains hampering growth

Growth is welcomed by SMEs. It represents the opportunity to hit greater sales after the sluggish 2020-2022 period. Growth does not come without its own set of challenges. SMEs may face increased financial pressures which require them to take on more funding and financing to support their expansion. Larger order volumes than usual require the SME to use its money upfront to purchase the necessary inventory. If all its clients paid their invoices, it may be able to fulfill the larger orders. Otherwise, taking on these orders would hinder its operations and impede its growth. Unpaid invoices have a snowball effect: they would grow and disrupt cash flow. Putting a brake on the SME’s progress is the “best-case scenario”; it could potentially derail the SME’s current operations!

For SMEs seeking to expand their business, invoice financing can provide the necessary capital to fund new initiatives and drive growth. Rather than taking on additional longer-term financing, they can leverage what they already have in their books.

Introducing Funding Societies’ Express Invoice Financing

Invoice financing is a financing arrangement allowing companies to finance the early payment on their sales invoices or sales purchases for goods delivered and/or services completed. Businesses needing consistent cash flow or cash upfront may find this business appealing. Funding Societies’ Express Invoice Financing provides two options: Account Receivable (AR) financing for sellers and Account Payable (AP) financing for buyers. The financing amount is up to 80% and 100% of the invoice value respectively. 

 

Express Invoice Financing is open to Malaysian registered companies with at least 30% local shareholding. These companies also need to be in operation for a minimum of 12 months. Successful SMEs will be given a facility limit of up to RM300,000 with a tenure of up to 90 days. No collateral is needed. 

Minimal documentation is required during the application. SMEs applying for this facility do not need to submit their audited accounts, management accounts, or ageing reports. Thus, SMEs will have relatively easier access to Express Invoice Financing facilities while they focus on their cash flow and their growth!

Find out more about Funding Societies’ Express Invoice Financing by visiting the website today. Seize this opportunity to further grow and expand your business.