Invoice financing is a revolving line of credit against unpaid invoices and the most recent increases in applying for it were noted after the Australian Taxation Office announced it was resuming tax debt collections.
The amount of debt owing to the ATO has climbed 14 per cent from the same time last year to over $40 billion.
Angus Sedgwick, chief executive of Optipay, said the most interest in invoice financing is coming from manufacturing and wholesale trade industries, with invoices in these industries still taking 15-20 days past the due date to be paid.
“Many companies with annual revenue between $2 million and $50 million and over are trying to fix their cashflow quickly as the ATO has begun contacting businesses individually and with some being issued with demands for payment to restart their overdue tax obligations after exercising leniency during the pandemic,” Mr Sedgwick said.
“During COVID the average advance rate of total invoice value dipped to under 50 per cent of the facility availability, as the ATO was not collecting tax, but was in fact handing out cash.
“This rate has now climbed back to around our long-term average of 68 per cent and is expected to go higher with the continued delays in customer payments and current supply chain issues many businesses are experiencing.
“It’s about accessing tomorrow’s cash today so instead of a business having to wait 30-plus days to be paid by their customers for goods or services delivered, invoice finance allows businesses to access up to 90 per cent of the amount invoiced to their clients upfront, with the balance less a small fee received with the client/debtor pays their invoice.”
OptiPay noted that in the US, UK and Europe, invoice financing is one of the most utilised types of business finance due to its ease and flexibility of use, whereas in Australia it’s estimated that less than 5,000 SMEs of more than 65,000 eligible businesses utilise invoice funding.
“During the height of the pandemic, the ATO wasn’t collecting debt so for businesses who weren’t paying their BAS or PAYG each quarter that was giving them a fair amount of extra cashflow,” Mr Sedgwick said.
“Now that the ATO has come knocking – businesses are looking for ways to improve their cashflow in order to meet their statutory debt obligations to the ATO. Invoice financing is popular amongst wholesale, manufacturing, transport & logistics, labour-hire, and services businesses. So essentially any business that invoices another business for goods or services on credit terms.”
