Invoice discounting facilities are a useful financial solution for small and medium-sized enterprises (SMEs) looking to improve their cash flow. By selling unpaid invoices to a loan provider at a discount, SMEs can access much-needed cash quickly, enabling them to fund their day-to-day operations, invest in growth opportunities, and manage unexpected expenses.
However, obtaining approval for invoice discounting facilities can be a challenge, especially for SMEs. Loan providers often require proof of the SME's ability to manage their finances effectively, as well as evidence of their creditworthiness. This problem is compounded by the obstacles SMEs often face such as a lack of collateral, limited credit history, and tight cash flow, which can make it difficult to secure approval for invoice discounting.
Adapting to new and future technology trends can help SMEs overcome the above challenges and increase their chances of securing approval for invoice discounting services. By leveraging the latest technology trends, SMEs can improve their financial visibility, enhance their financial performance, streamline financial operations, and demonstrate their ability to manage their finances effectively to loan providers.
Below, we explore five of the best emerging and established technology trends so you can adopt new technologies or optimise your existing tools more easily.
Cloud-based accounting software such as QuickBooks, Xero, and Zoho Books have become increasingly popular among SMEs, enabling them to manage their financial records more efficiently. For example, features like automatic bank feeds, online invoicing, and expense tracking can help SMEs maintain accurate and up-to-date financial records.
However, many SMEs do not fully utilise the features that these software solutions offer. The reporting functionalities that enable businesses to customise reports and generate them regularly are often overlooked. Inventory management, budgeting and time tracking are also easily managed if the software is used optimally.
Utilising these capabilities can help SMEs gain insights into their financial performance, identify areas for improvement, and demonstrate their financial stability to lenders. Having accurate financial records can improve the visibility and transparency of SMEs' financial performance, which can help them secure approval for invoice discounting.
Electronic invoicing, or e-invoicing, is the process of creating and sharing invoices electronically. It can significantly reduce the time and costs associated with traditional paper-based invoicing processes. E-invoicing also improves accuracy, increases visibility into the invoice lifecycle, and enables faster payment processing. This can improve cash flow management and enhance SMEs' creditworthiness when seeking invoice discounting facilities.
Providing a higher degree of control, insight, and data integrity (e-invoices reduce the risk of fraudulent bills), e-invoicing is a tool which all SMEs should be taking advantage of.
Supply Chain Automation involves using technology to streamline the flow of goods and services through a supply chain. This can include the use of automated inventory management systems, transportation management systems, and other tools that can help businesses manage their supply chains more effectively.
SMEs can begin adopting automation by identifying their supply chain “pain points” and evaluating which processes can be automated to improve efficiency and accuracy. Spend time researching the most appropriate technologies for you; whether it is RPA (robotic process automation), AI (artificial intelligence) or blockchain, start by implementing them gradually.
Consider partnering with third-party logistics providers or technology vendors to access supply chain automation capabilities and expertise. SMEs need to assess their readiness and capacity for supply chain automation and invest in the necessary resources and training to ensure successful implementation.
This will help them secure invoice discounting services because improving the efficiency of the supply chain helps SMEs demonstrate that they are committed to optimising operations, enhancing visibility, and effectively managing cash flows.
The growth of Artificial Intelligence (AI) and machine learning in the last 6 months has been significant, but it can prove overwhelming for SMEs to know how to use it effectively. Leveraging AI and machine learning can be particularly helpful for SMEs focused on optimizing their financial performance:
These technologies can enable SMEs to analyse their financial data and identify trends and patterns that can be used to improve their financial performance. By using AI and machine learning in this way, SMEs can demonstrate to lenders that they have a solid understanding of their financial performance and are taking proactive steps to improve it.
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Blockchain technology is a decentralized digital ledger that records transactions securely and transparently. It was first conceptualized in 2008 and has since grown to become a powerful tool for SMEs to improve their operational efficiency, reduce costs, and enhance their overall business performance.
Blockchain technology can help SMEs improve the security and transparency of their financial transactions before applying for invoice discounting services. The result will be a more reliable record of their financial transactions to show to potential loan providers.
The use of technology can greatly benefit SMEs by improving their financial performance, increasing operational efficiency, and reducing costs. By implementing new technologies such as e-invoicing, supply chain automation and AI, SMEs can demonstrate to lenders that they are taking steps to improve their financial standing and are better positioned to secure funding through invoice discounting.
SMEs who adapt to new and future trends in technology will have a competitive edge, allowing them to stay ahead and grow in a business environment that is continually shaped by technological advancements.