Perttu Jalkanen, Co-Founder & CCO, AREX Markets


If I told you there was an opportunity to advise your clients on a way to liberate cashflow quickly within their businesses, but only 1% of companies in the UK were using it, would you recommend it? At the very least, you’d want to know more about the process.

That technique is invoice financing. You might think you know it. However, it’s swiftly emerging from its less than illustrious past thanks to the fusion of alternative finance thinking, technology and data.

When it comes to the process, there’s a lot to recommend. It can inject money back into a business – often within 24 hours – which is cash the company has already earned, but may otherwise have to wait 60 days, 90 days or sometimes even longer to receive. There is a well-known imbalance between often much larger businesses and the payment terms they insist upon with smaller suppliers, but the past year has made its effects still more pronounced. During a time when almost two thirds of SMEs recently claimed that late payments were putting their businesses at risk, looking to access these earnings more quickly should be an attractive option.

The technique is also quickly moving away from its historical perceptions, which saw the process often controlled by the banks, and plagued by high fees and poor rates of return back to the businesses that needed it. Thankfully, thanks to fresh fintech thinking, the 2008 banking crash limiting banks’ capacity to lend to small business, and a growing ethical drive in finance, these factors are no longer the case when it comes to freeing up the money from invoices issued.

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A recent survey by the British Business Bank found that over four in five business advisers and accountants think there are gaps in the supply of finance to small businesses, while over three-quarters believe that demand for finance is outstripping supply. Clearly, it’s time that business owners and their financial teams look beyond traditional finance options if they are to bridge this gap. Invoice financing effectively allows the business to help themselves. Ultimately it lets businesses access their money, much more quickly – instead of relying on high interest credit cards, loans or taking on other debt to meet their overheads.

Just as banking is opening up, so are other finance options to business and the market is more competitive for it. Under new emerging factoring offerings, businesses aren’t forced to deal with small numbers of banks providing the financing. The interest rates are therefore more level. With systems like ours, for example, the process does not use a single specific lender but instead a marketplace of sophisticated investors, which keeps the interest rates far more favourable. Not to mention that seeking to bolster the company coffers in this way avoids taking on the burden of more debt, either in the form of loans, credit card debt or overdrafts.

So much for the benefits for the business, what about the accountants? Aside from cutting down the amount of time and effort spent chasing late payments,many of these new breed options are just a click away on existing finance platforms like Xero. New entrants like us don’t tie a business into any long term relationships, so it can be used as a stop gap, an insurance policy finance option or a way to even the cashflow out over a longer period.There’s no licensing requests or tie-ins requiring accountants to sell access – merely an optional tool for businesses to deploy if needed. And because these options are technology-fuelled, it should be a lot easier to clearly compare the benefits of each potential option to find the right one for the business.

Most importantly, thanks to the growth of service providers like Xero, Quickbooks and Sage, accountants are increasingly becoming something much more to their customers than people who just receive a shoebox full of receipts every so often. Many are stepping up into quasi-FD or CFO roles, helping businesses more directly by recommending tools and techniques with which they can run more effectively. This requires a knowledge of how the market is evolving to be able to keep a finger on the pulse for new opportunities in the market and how they can help the business to adapt and grow. As the role of the accountant continues to change, being open to new approaches from the fast-moving world of alternative finance will be a major asset to any private practice.

Ultimately, when it comes to bridging SME financing gaps, the opportunities are out there. It is the open-minded and forward thinking accountant which is seizing them.