Reducing pressure on liquidity and having funds to be able to carry out the next project is on every startup’s priority list. Maintaining healthy liquidity is necessary to operate successfully, but, sometimes, accounts receivable can add financial pressure. Advance invoicing helps to mitigate this internal pressure while suppliers receive their payments.
High-growth companies often find themselves constantly searching for financial resources to fuel their progression. On this journey, advance invoicing can be a very useful tool to secure the liquidity needed to operate effectively and take advantage of expansion opportunities.
In essence, advance invoicing is an advance payment from a customer on account of a purchase or the contracting of a service. It is a short-term financial solution to compensate for the temporary mismatch caused by customers paying in instalments, which makes it possible to correct or mitigate situations where there is a lack of liquidity.
In general, requesting an advance invoice payment allows you to cover operating costs and immediate expenses, which is especially valuable in situations where payment deadlines are long and can put a strain on your company’s liquidity. In addition, advance invoicing allow you to convert accounts receivable into cash to finance projects, pay suppliers or even invest in business growth.
By reducing the pressure on liquidity, more informed and strategic decisions can be made. It is also a way of securing the exchange: advancing part of the money usually leads to greater success in the transaction with the customer or supplier, who will not want to lose the advance.
As such, this tool can be of great benefit to high-growth companies as they face financial pressures in their quest to scale quickly:
Companies can use funds derived from advanced invoicing strategically: to finance critical projects, expand the business or address urgent financial needs. Planned investment will help accelerate growth with the following steps:
Advance invoicing and factoring share some characteristics, as they are two ways to obtain liquidity quickly and help improve cash flow. It is important to understand the differences between them in order to use the option that best suits each company’s situation and needs.
Which option to use will depend on business needs and the strategic financial vision applied. Advance invoicing is a valuable option for ensuring liquidity and avoiding capital dilution, as well as increasing customer and supplier commitment. In short, it is a useful item in the startup financial toolbox that can help ensure healthy liquidity and sustainable growth.