Access cash locked up in debtor invoices

Many small businesses have a large amount of cash locked up in debtor invoices and not avail­able either for investment or for usual business purposes.

With companies taking longer to pay, this situ­ation can only get worse, but the traditional solu­tion of using invoice factoring or discounting is not always the answer.

Such a step can be seen as a fairly drastic option that hands over control of the company’s entire invoicing and debt recovery operation to a third party and can interfere with the good relation­ship that the business has worked hard to build up with customers.

Selective invoice discounting

It was to give such companies a more flexible option that two years ago Malcolm Piper set up a ground breaking selective invoice discounting busi­ness, Tandem Invoice Finance, based in Chichester.

“Tandem differs from most invoice discounting operations because it is completely flexible and leaves overall control in the hands of the company involved,” explained Malcolm.

“Mainstream invoice finance companies expect businesses to hand over their entire sales ledger and debt collection operation, but at Tandem we believe in letting companies continue to work within the business relation­ships they have built up.

“What we do is offer our clients finance against individual invoices. What’s more, we advise them only to take out of the invoice as much as they need for the project in hand, which reduces their cost.

“If a company is owed £30,000 from an invoice but only needs £20,000 at that time, we will advance £20,000 of that invoice and only charge a fee based on that sum, not on the size of the invoice as a whole – and we let them manage the invoice as part of their normal business practice with their customer.

“Once the invoice is settled our clients are not under any commitment to continue using our services, but the best testimony to the way wo do business is that more than 70% of our customers choose to use us again.

“We see this as a service to small and medium-sized businesses that want help with their cash flow without handing over their entire sales ledger or losing control of their customer relationships – and it is proving increasingly popular with a wide range of customers.”

Once a company has set up an overall master agreement with Tandem, individual invoices can be discounted quickly and simply without any ongoing fees or long-term commitments.

Reference: South East Business Magazine August 2011