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Cashflow crisis averted: My eureka moment

In the fast moving world of business, it’s easy to let your finances slip every now and again - more so in a small business. That's why discovering a new way to balance the gap between finishing a job and receiving payment has made such a difference.

We’ve all been there, giving clients 14 days and they pay in 30, giving clients 30 days and they pay in 60! It shouldn’t be that difficult, so why is it? 

My name is Jon Catney, I’m the founder of Chimpsta, an experiential marketing platform that utilises social media and immersive technologies to increase spectator engagement at your events. We set up a couple of years ago now and work mainly B2B (business to business). When we set up it was meant to be nothing more than a novel idea that enabled event guests to print their social media photos. It quickly grew into a platform that revolved around increasing engagement, and now provides many other services to bigger brands. 

I’d be happy to admit that when I first started the company I hadn’t got a clue on how to price our product. It was a fairly new concept to the market so pricing was tricky to guage. We wanted to differentiate ourselves from existing products by providing much more pre-event, during and post-event. With this came a totally different pricing structure. Yes, we could have simply created a few small packages, but we wanted the big market leaders to use us as well as our smaller clientele. Once we decided on a way to package our product and deliver it in the easiest, cleanest, most invoiceable way possible, we got to work on securing bigger contracts. 

It wasn't too long before we discovered that the bigger clients always have their own procurement and payment teams with strict rules on when they pay out. More often than not we found those willing to book us had procedures in place for working with SMEs and payment terms were dictated to us, not the other way around. Most clients paid out 30 days from date of invoice, some were 30 days from the event date. This led to some payments being 60-90 days in arrears, and me scrabbling around trying to purchase the equipment and supplies required to actually work these events. 

Last year (2015) we were cutting it a bit too close to the wire. One client had about £10k outstanding for 6 months. I tried everything, incentives for early payment, threatening to apply interest per day it remained outstanding etc etc. Some might argue I was too lenient, but it's difficult to turn down work from high-prolfile clients - even if they owe you money! And, they had raised a purchase order for the job, so It didn't feel too risky. Anyway, we got paid in the end, and have continued getting work from them and it’s now safely in the history books. 

I vowed never to let our growing company get into that situation again and decided to take preventative measures. We started applying discounts on payments made within a set period of time after the invoice has been raised. That helped in some cases, but I wanted to find a longer-term solution to bridging the gap between work and payment. That's how I stumbled across the concept of Invoice Finance.

My searching led me to URICA - government backed company underwritten by Euler Hermes (the world’s largest credit insurer). They provide the ability to add your invoices, send them to a client for goods or services and provide extended credit terms at no extra cost to your customer and without risk of debt to you as a business. How’s it different to factoring you ask? Factoring is a form of bank loan, where the bank requires the suppliers enter into a long term agreement. In addition to the initial set up fee there is a fee for each invoice as well as multiple other charges they get you for throughout. We found that all factoring companies we tried wanted to charge us in excess of £200 per month to use their system plus a fee per invoice on top! 

URICA differs by paying the cash to you immediately, without you taking on any debt or liabilities. They take the risk and only charge a small percentage of each invoice and that’s it. No additional fees, no knocks on the door to repay, no telephone hassling clients or yourself to recover monies. It’s great! 

We use it for almost every invoice we produce as a business, you can pick and choose which you want to put on their system without being charged for not using them. Fees per invoice range depending on the amount billed and credit term you offer to your clients. Typically, we pay around 1.5% of the invoicable amount to use the service. That’s a fee I’d happily pay time and time again to get paid the same day you raise an invoice. No waiting 30 days, no hassling clients when they’re late. No, you get paid there and then and can go about your daily business with your cashflow set free.

It’s always difficult to fully manage your invoice flow but why wait around, take action now and start utilising services like this that mean you get paid quicker. The fee is negligible when you compare it to the time spent fretting and chasing late payments that often drive you into the bottom of your overdraft. We’ve all been there and it’s not nice, so do something about it.

Why not give URICA a call or email to discuss how they can smooth your cashflow issues now. They even have a handy calculator to see exactly how much you’ll pay on an invoice amount. I should say that I'm not connected to URICA in any way - I just wanted to share this doscovery with other business who will have no doubt found themselves in a similar situation. I hope it helps! Make sure you say hi from the Chimpsta team, they love knowing we’re spreading the good word!

Blog provided by – Jon
Catney, Plymouth University Alumni & Founder of Chimpsta and
Origin Tickets

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