Invoice Finance is an effective form of business finance for a wide range of industries and small and medium enterprises (SME), including companies working imports and exports.
Whether you need to pay overseas suppliers, fund freight or cover customs costs, if you’re an importing business you might find yourself needing to bridge the gap in cash flow caused by sent deliveries prior to your customer settling their bill.
That’s where Invoice Finance can help.
Invoice Finance is a very effective working capital solution for businesses that work in imports
ScotPac New Zealand can help you find the right trade finance solution to suit your needs. To find out more about our Invoice Finance service offering, click here.
How does Invoice Finance work for New Zealand importers?
Invoice Finance provides advanced access to the working capital that is locked in your unpaid customer invoices.
Instead of having to wait your 30-to-90 payment period, you can submit your invoices for funding through ScotPac and receive up to 85% prior to payment.
Once your customers pay for the goods, you will receive the balance less any fees.
Why is cash flow management so important?
International invoices tend to take longer to settle than domestic bills. This can mean that there is a delay in working capital hitting your business’s banks.
And this is when your import cycle is smooth and consistent. When subject to customs delays and other import-related factors, importing businesses can struggle with significant cash flow management gaps.
Instead of relying on overdrafts or other forms of high-interest business debt, Invoice Finance allows you to leverage your unpaid invoices as security.
With predictable, controllable, and flexible access to working capital, you can fund:
- Offshore purchases
- Freight costs
- Custom taxes
- GST
- Warehousing costs
- And other imports’ related expenditure
Once your customers receive their products and settle their invoices, you can collect the outstanding amount and continue to grow and use your facility as your sales scale.
How can you use Invoice Finance to mitigate customs delays?
Between customs checks and biosecurity inspections, and from documentation queries to busy ports, imported goods are subject to many potential delays coming into New Zealand.
Whilst Invoice Finance is not designed to usher goods through customs more quickly, it can certainly help you cover gaps in cash flow during those delays.
After all, just because you are experiencing customs delays it does not mean you can delay deposits to suppliers, charges for freight, custom and port fees, and even GST.
Invoice Finance allows you to access the otherwise inaccessible cash tied up in your unpaid invoices when you need it.
The reliable, consistent funding line allows you to weather the extended payment terms and customs delays as required.
How can you use Invoice Finance to optimise margins on imported products?
Invoice Finance is a flexible and scalable business finance solution.
As your sales increase you can submit higher value invoice/s for funding. This access to working capital helps you accept larger orders, negotiate more favourable pricing with suppliers and maintain smarter inventory positions without compromising your financial stability.
Additionally, having access to working capital when you need it allows you to take advantage of time-sensitive opportunities, such as early or bulk-buy discounts.
How should you set up your Invoice Finance?
For optimal cash flow management, a structured Invoice Finance facility is your best solution. So, how can you achieve this?
Map your entire cash conversion cycle
This includes when you need to pay deposits, when you need to have your imported goods sent, when you need to invoice customers and when those customers are due to pay.
Identify your cash flow pain points
Determine where in this cycle you need to access additional working capital to ensure you can meet required business expenditure.
Submit your invoices for funding
If you have creditworthy customers who are reliable when it comes to payment, you can select and submit invoices for funding.
Access working capital
Once approved, which can be in as little as 24 hours, you can draw on the working capital needed to meet the costs of trading
Monitor, track and tailor
Continue to track your utilisation of available working capital and time it takes for your customers to pay their invoices to ensure your Invoice Facility continues to work for you
What is the difference between Invoice Finance and overdrafts or term loans?
Overdrafts and term loans are financial solutions that are secured against assets such as property. They are also subject to a fixed ceiling in funding limits.
For a growing importer, this can mean limited potential for expansion.
Invoice Finance differs from overdrafts or term loans in a few key ways:
- It uses your accounts receivable as security
- It can scale as your sales increase
- It can be utilised when you need
Can you use Invoice Finance and Trade Finance at the same time?
Trade Finance can also help importers in a number of ways and with a number of funding requirements:
- Deposits
- Letters of credit
- Advance payment to overseas or international suppliers
Invoice Finance helps importers access the money due to them ahead of payment, which combined with a Trade Finance facility can help bridge cash flow gaps that manifest between purchase order and final payment.
1. First you use Trade Finance to pay your supplier when they ship products to you
2. Then you receive the goods and clear customs
3. Next you issue an invoice to your customers
4. Lastly, you can submit invoices for Invoice Finance prior to receiving payment
5. The advance cash can then be used to repay the Trade Finance facility when due
This cycle can then repeat itself as required.
How do you find the right Invoice Finance partners for your import business in New Zealand?
You can give the ScotPac team a call. That’s how.
ScotPac has over 35 years of experience and our team supports over 9,300 businesses and funds $26.3 billion invoices annually.
We understand both the challenges of customs delays and international invoices and can use both Invoice Finance and Trade Finance to help you access the working capital you need to fuel your business’s growth.
