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Starting and Growing a Career in Web Design
The cash flow challenge
For service businesses, the gap between completing work and getting paid can feel like crossing a desert with a leaky water bottle. You've earned the money - it's rightfully yours - but it's not in your bank account when you need it for payroll, vendors, or growth opportunities.
Many businesses turn to invoice financing to bridge this gap. But is that always the best solution? Let's compare traditional invoice financing (like Bill.com offers) with newer approaches like Cheque to see which might be right for your business.
How invoice financing works
Traditional invoice financing allows you to get paid immediately for outstanding invoices, but for a price. Here's the typical process:
You complete work and invoice your client
The financing company advances you 70-90% of the invoice value
Your client eventually pays the full invoice to the financing company
You receive the remaining amount, minus fees and interest
It sounds straightforward, but there are important details to consider.
The true cost of traditional invoice financing
When examining options like Bill.com's invoice financing, look beyond the advertised rates:
Hidden fees:
Processing fees (often 1-2% per invoice)
Monthly minimum charges
Servicing fees for each invoice
Setup and integration costs
Steep interest rates if the client doesn't pay on time
Reduced control:
Your clients often pay the financing company directly
All invoices typically must go through their system
Minimum volume requirements may apply
Client perception:
Some clients view invoice factoring as a sign of financial weakness
Communication can become complicated with a third party involved
Long-term impact:
Average APR equivalent often reaches 24-36%
These costs compound over time and eat into margins
While invoice financing provides immediate cash, it's essentially an expensive loan that can create dependency and erode profitability.
The Cheque approach: Client-driven early payments
Cheque takes a fundamentally different approach to the cash flow challenge:
You invoice through Cheque with your preferred payment terms
Your client sees options to pay at different times with corresponding incentives
If they choose to pay early, you get the cash immediately
If they pay on normal terms, everything proceeds as usual
This model creates several distinct advantages:
Transparent pricing:
You determine what discount (if any) to offer for early payment
No hidden fees, monthly minimums or interest rates if the client doesn't pay on time
Predictable cost structure that you control
Maintained relationships:
Your client relationship remains direct and unmediated
Early payment is positioned as a win-win option, not a desperate move
Clients appreciate the flexibility they're given
Greater control:
You choose which invoices to offer early payment incentives on
No requirement to process all invoices through the system
No minimum volume requirements
Long-term sustainability:
Typical effective APR equivalent of 12-18% (compared to 24-36%)
Creates a sustainable cash flow pattern rather than dependency
Cost comparison: A real-world example
Let's compare the costs for a business with $50,000 in monthly invoices wanting to reduce their cash flow gap by 20 days:
Traditional Invoice Financing (e.g., through Bill.com)
Advance rate: 80% ($40,000 immediate cash)
Monthly fee: 2.5% ($1,250)
Processing fees: 1% ($500)
Monthly maintenance: $100
Total monthly cost: $1,850 (4.6% of advanced amount)
Annual cost: $22,200
Effective APR: ~28%
Cheque Early Payment Approach
Early payment discount: 2.5% ($1,250)
Platform fee: 0.75% (included in discount)
Discount towards your client: 1.75% (Early payment discount minus the platform fee)
Processing fees: $0
Monthly maintenance: $0
Total monthly cost: $1,250 (2% of advanced amount)
Annual cost: $15,000
Effective APR: ~19%
In this example, Cheque costs 1/3 less while providing more flexibility and maintaining direct client relationships. Plus, the 1.75% discount goes to your client - not an invoice financing company.
Making the right choice for your business
The best approach depends on your specific situation:
Consider invoice financing if:
You need immediate cash for a one-time emergency
Client relationships are already distant or transactional
You're comfortable with higher costs for complete certainty
Consider Cheque if:
You want a sustainable, long-term cash flow solution
Client relationships matter to your business model
You prefer flexibility and control over your finances
Most businesses find that client-driven early payment systems like Cheque provide the best balance of immediate cash flow improvement, reasonable costs, and maintained client relationships.
Try before you commit
The good news is that you don't have to overhaul your entire financial system at once. Cheque works alongside your existing invoicing platform, allowing you to test the approach with a few selected clients before making any big changes.
If you're curious whether this approach might work better than traditional invoice financing for your business, let's talk.