Owning an accountancy practice involves a lot of financial admin, yet countless practices find themselves in the ironic situation of helping clients manage their cash flow while quietly suffering with their own.
Even when business is good, there can be pressure on a firm’s working capital due to late-paying clients, long invoice payment terms and peaks in income periods throughout the year.
This is precisely the problem that invoice finance for accountants solves. Instead of waiting for 30, 60 or even 120 days for client invoices to be paid, your practice can receive up to 95% of the invoice value within 24 hours of raising that invoice. So you end up with a cash flow that is reliable, recurring and does it all without traditional debt.
In this guide, we explain what invoice finance is, how it works specifically for accountancy practices, the types available, and how ComparedBusiness UK can help you find the right provider.
Key takeaways
1. Invoice finance for accountants allows practices to release up to 95% of the value of unpaid invoices, typically within 24 hours.
2. It helps accountancy firms overcome cash flow problems caused by slow-paying clients and long payment terms of 30 to 120 days.
3. The two main types are invoice factoring (lender manages collections) and invoice discounting (practice retains control).
4. Selective invoice finance lets smaller practices fund individual invoices without committing their entire sales ledger.
5. Optional bad debt protection can be added to safeguard against non-paying clients.
6. Invoice finance is not a loan; it is an advance against money already owed to your practice.
7. ComparedBusiness UK makes it easy to compare invoice finance providers and find the best deal for your accountancy firm.
Get Best Invoice Factoring Providers Quotes
What Is Invoice Finance For Accountants?
Invoice finance is a business funding solution that allows accountancy practices to borrow against the value of their unpaid invoices (the amount of money owed by clients).
Instead of waiting for customers to pay on their terms, the practice obtains a payment in advance from a lender, usually up to 95% of the value of the invoice, minutes after it has been issued.
The lender then holds on to the rest until the client pays the complete invoice, after which, minus an agreed payment, they remit what is left to the accountancy practice. This means that your practice can receive a steady stream of cash, no matter how long it takes clients to pay their bills.
Invoice finance has no extra debt involved, unlike a business loan. You are just releasing money you would have received anyway, but sooner than your client would have paid you.
Industry Insight
Did You Know? The UK accountancy profession contributes approximately £59 billion to GDP, with the accounting industry itself generating £17.2 billion. Despite these figures, many practices face persistent cash flow challenges due to delayed client payments.
Why Should Your Accountancy Firm Consider Invoice Finance?
The UK accountancy services sector often faces cash flow problems. Here are the reasons why accountancy practices should consider invoice finance:
- Nature of Payment: Client payment terms of 30, 60, or even 120 days often leave accountancy practices with a significant amount of income tied up in unpaid invoices.
- Seasonal Peaks: Typically near the self-assessment deadline in January or around financial year-end, leading to uneven income cycles.
- Business Overheads: Salaries, software licences, office expenses and professional indemnity insurance come out regardless of the cash-flow position of clients.
- Accountancy Expansion: Funding is required for hiring new staff, investing in new software systems, or upgrading to larger premises, as insufficient working capital makes it difficult for any practice to invest with confidence.
Invoice finance removes these pressures. By releasing the cash locked in your unpaid invoices, you can meet obligations on time, invest in growth, and stop spending valuable time chasing clients for payment.
Advantages Of Invoice Finance For Accountants
Here are some of the main reasons why invoice finance is ideal for accountancy firms. Below are some of the key benefits:
| Faster Access To Cash | You will receive between 80% and 95% of the invoice value within 24 hours of submitting the invoice |
|---|---|
|
Improved Cash Flow |
Say goodbye to waiting 30 to 120 days for your clients to pay you and have a steady working capital |
|
Optional Bad Debt Protection |
Add-on cover protects your practice if a client does not pay |
|
Flexible Facility |
Opt for selective invoice financing if you are looking to charge individual invoices or a whole-ledger facility as you scale |
|
Better Supplier Terms |
Having a steady cash flow allows you to negotiate favourable payment terms with your suppliers |
|
Support Business Growth |
Get larger clients and hire people or upgrade technology without worrying about cash flow |
Note: Confidentiality is essential in accountancy practices. With confidential invoice discounting, your clients will never have to know a finance facility is in place. Your practice will have total control over credit management and client relationships.
Types Of Invoice Finance For Accountants
Invoice finance products are not all alike. Which is right for you will depend on the size of your accountancy firm, how much you want to control your clients and whether or not you would like your entire sales ledger funded or just a few key invoices.
Here is an overview of types of invoice finance for accountants:
| Type | Best For | Advance Rate | Disclosed To Client? |
|---|---|---|---|
|
Invoice Factoring |
Practices that want full collection support |
Up to 95% |
Yes |
|
Invoice Discounting |
Firms that want to keep client control |
Up to 95% |
No |
|
Selective Invoice Finance |
Smaller or growing practices funding one invoice at a time |
Up to 90% |
No |
1. Invoice Factoring
Invoice factoring means you sell your unpaid invoices to a factoring company. The lender pays you up to 95% in advance and takes on the burden of chasing clients for payment. This option is ideal for practices looking to completely outsource any aspect of their credit control function.
Read More: Invoice factoring costs in the UK
2. Invoice Discounting
With invoice discounting, you keep your credit management in-house; however, it all works on a similar principle. Because your clients do not know that a finance facility is available, invoice discounting is commonly preferred by established accountancy practices looking for discreet funding without affecting their relationships with clients.
Want to learn more about the difference between disclosed and confidential factoring?
See our guide: Disclosed and Undisclosed Factoring: What’s the difference?
3. Selective Invoice Finance
Selective invoice finance, also known as ‘spot factoring’, allows you to fund individual invoices on a case-by-case basis rather than committing to an entire ledger facility. This leaves smaller or newer practices with the most flexibility, especially when there is just one outsized invoice they need to shift fast.
Learn more about spot factoring from our guide: Spot Factoring Costs Explained
How Does Invoice Finance For Accountants Work?
The process is straightforward. Here is how invoice finance for an accountancy firm works:
| Step 1 | Submit Your Invoices | The moment you create an invoice for a client, send it to your invoice finance provider |
|---|---|---|
|
Step 2 |
Receive The Advance |
The lender sends up to 95% of the invoice value, usually within 24 hours |
|
Step 3 |
Remaining Balance Released On Payment |
Once your client pays the invoice, the full payment is released to you instantly, minus the service fees |
Most providers can complete the full cycle, from submission of an invoice to the transfer of funds for the advance, in less than 24 hours.
The pricing model typically includes two types of fees: a service fee (percentage rate, based on your annual turnover or invoice volume) and a discounted rate (similar to interest, charged on the amount you withdraw).
How Does the Invoice Facility Work?
Invoice finance is a revolving facility. As you raise new invoices and customers pay existing ones, your available funding automatically adjusts. You only pay for what you use.
How Can Accountancy Firms Apply For Invoice Finance?
Applying for invoice finance as an accountancy practice is a relatively simple process. Most lenders will want to understand the following:
- Annual turnover and B2B invoices issued by you.
- The creditworthiness of the clients you invoice.
- Your current payment terms and average debtor days.
- Whether you need a whole-ledger facility or only invoice finance for selective invoices is the question.
Most invoice finance providers offer quick decisions, often within 24 to 48 hours, and can set up a facility within days. You will generally need to provide recent accounts, a list of outstanding invoices (your debtor ledger), and details of your main clients.
Key Point: Invoice finance is a tool that was designed for B2B. If your practice invoices business clients rather than individual consumers, you almost certainly qualify.
How To Find The Best Invoice Finance Providers For Accountants In The UK?
With a wide range of lenders operating in the UK market, from high street banks to specialist independent providers, finding the right fit for your practice can feel overwhelming. Here is what to consider:
1. Compare Rates and Fee Structures: Providers have considerable variation across discount rates and service charges. The total cost of the facility should always be compared rather than just the headline advance rate.
Want to compare top invoice finance providers for accountants? ComparedBusiness UK helps you get matched with top invoice finance providers within minutes.
2. Look For Sector Experience: Professional services providers with an understanding of the practice will be ideally positioned to evaluate your requirements and create a suitable arrangement.
3. Check Contract Terms: Some providers require long minimum contract periods or charge exit fees. Look for flexible terms that suit your practice’s growth stage.
4. Consider Credit Control Support: If you want help with collections and want someone else to pursue your debtors, choose a factoring provider that offers collections.
Bad Debt Protection: If you are worried about client insolvency, see if bad debt protection (non-recourse factoring) is offered as an add-on.
Find The Best Invoice Finance Providers For Accountants In The UK With ComparedBusiness UK
ComparedBusiness UK is a free comparison platform that helps accountancy practices across the UK find the most competitive invoice finance providers, all in one place, with no obligation.
Instead of contacting lenders one at a time and spending hours sifting through each quote, you can use ComparedBusiness UK to
- Get no-obligation quotes from top invoice finance providers in the UK.
- Compare rates and terms quickly.
- Find firms that work in accountancy and professional services.
- Save time and make a confident, informed decision for your practice.
ComparedBusiness UK gives quick and free access to invoice finance solutions for sole practitioners, growing mid-size firms, or established accountancy groups. Just fill in a short quote form and we will connect you with the top invoice finance providers in the UK.
FAQs
Generally, invoice finance providers will release the funds for you within 24 hours of submitting an invoice. It only takes a couple of days to set up the first facility, but once it is there, funding comes fast and continues for months.
Not necessarily. In the case of confidential invoice discounting, the facility is completely kept under wraps, and your clients continue to pay you as they always have. In contrast, invoice factoring is often even disclosed to clients, as it has outsourced the collections process.
No, invoice finance is not a loan. It is prepaid against funds that are already owed to your practice. You are not borrowing money; you are just getting your earned income sooner.
