The future of financing, why more bodyshops are turning to invoice factoring

The number of challenges bodyshops face day-to-day are increasingly varied. From chasing payments to ensuring there’s enough money in the bank to meet financial obligations, it can often feel like money is thin on the ground. However, finding a reliable, cost-effective funding solution that it is tailored to the needs of bodyshops can be challenging. Many bodyshop choose expensive forms of debt like credit cards and loans to cover repair purchases or use costly bank services, all chipping huge chunks off the bottom line.

Over the past 12 months, leading invoice funding partner, ACG has seen a significant number of bodyshops choose its services to resolve their cash flow issues, in turn building stronger businesses that are better able to meet the challenges they face. So, could invoice funding be the key to financial stability for bodyshops? Let’s explore.

Understanding Invoice Funding For Bodyshops

The primary reasons bodyshops seek alternative invoice funding solutions are to boost cash flow and provide financial stability. Invoice funding/factoring is a simple process in which the bodyshop sells their invoices to a third party, like ACG.

“Working with us is simple. Once our customers are set up on our system and approved, we can fund within 24 hours. All they need to do is email an invoice pack and as long as we receive it before the cut off time, bodyshops are guaranteed payment next day. Leaving them to focus on their business”, commented Andy Massey, Customer Relationship Manager at ACG.

Financial Challenges Faced by Bodyshops

Managing cash flow is often more complex and challenging for bodyshops than for other businesses. Long payment terms imposed by most work providers mean that bodyshop owners can expect to wait 30-60 days for payment. This limited access to cash has a huge impact, often resulting in compromised operating efficiencies, reduced repair capacity, diminished profitability, financial instability, and increased stress levels across the whole business. In addition, there’s the never-ending challenge of getting funds back into the business.

Benefits of Invoice Factoring for Bodyshops

There are a host of benefits of invoice factoring for bodyshops, from improved cash flow due to the speed at which money comes into the business. Plus, the flexibility it gives bodyshops verses traditional loans and other financing products. Resulting in giving bodyshop owners the time and headspace to develop process efficiencies and reducing stress levels, which in turn promotes profitability.

An often-overlooked benefit is that factoring means there’s no additional debt for the bodyshop, making their balance sheet look stronger. Through all these benefits, bodyshops are able to grow and expand, creating stronger businesses that are resilient for the future.

How to Get Started with an Invoice Funding Solution?

Choosing the right invoice funding partner is the first place to start. Due to the unique needs of a bodyshop, it’s important they consider industry experience, as well as reputation, terms, fees and communication.

Fees and rates are extremely important, especially for a bodyshop who is trying invoice funding for the first time. They don’t want to be stung with minimum monthly invoice volumes, stealth charges, and high fees that take too much off the bottom line. What ACG does well is offer bodyshops a favourable, flexible, pay-as-you-go service at a brilliant rate, enabling customers to pick and choose what they want to process.

Misconceptions Around Invoice Factoring

There’s no escaping the misconceptions surrounding bodyshops who are seen to factor their invoices. It’s often thought that it’s an expensive form of financing. However, fees can be as low as 3% dependent on who you use, and because you only pay a fee on the invoices you choose to factor, the average cost per repair is much lower than that. If these costs are viewed as an investment, the ROI is significant.

Historically, traditional invoice factoring was often considered a solution for a struggling business, with a perception that the bodyshop was in trouble, which of course could raise concerns.  However, today the majority of bodyshops using alternative invoice funding solutions are recognised as being thriving dynamic businesses who are set on growth trajectories.

The Future of Financing in the Bodyshop Industry

The automotive industry is one of the most pioneering and technologically driven sectors in the world. With the increased level of technology that is in the car of today, bodyshops need to keep pace with the speed of developments and to do that they need access to funds for training, equipment, and parts if they are going meet the needs of their work providers and customers. In short, successful bodyshops are now thinking differently when it comes to improving cash flow.

Conclusion

On reflection, it’s clear to see the value invoice funding can bring to a bodyshop, unlocking huge potential through the removal of long payment terms. The fact that a bodyshop owner knows how much they’re going to be paid and when they will be paid is a solid foundation to invest into the business and promote growth opportunities through increasing work streams from numerous sources.

For those wanting to explore this financing solution for their bodyshops, ACG’s team of experts are on hand to support, simply get in touch for a quick call to discuss your options.