Invoice Discounting is fast becoming seen as an ideal means of releasing cash for operations and transactions. Once viewed of as a sort of last resort for companies which had exhausted the traditional forms of credit, it is now accepted as a normal means of improving cash flow within businesses of all sizes.

"All our customers will have accounts within our network, " said David Widger, business development manager with AIB Commercial Services, the Invoice Discounting arm of AIB. "This means that they will probably have an overdraft with us, but sometimes they will require more funding which may not be available through the usual methods. In these cases, their branch may recommend them to us as a suitable solution to their cash flow requirements."

In buying a debtor book from a company, the bank will take legal ownership of the debts, but on a confidential basis - a company's debtors will not know that their debts have been bought by AIB. Of course, the bank will have carried out an aged debtor analysis, and will disallow any outstanding debts, thereby building in certain protections for itself and its clients.

AIB Commercial Services has certain advantages over its competitors, not only in the size of the bank, but in the closeness of the relationships within the AIB network - AIB Commercial Services works with the retail branches, the commercial operations and the corporate operations of the bank to put together comprehensive financial packages for its customers, whether small, medium or large.

"In its initial stages, Invoice Discounting experienced much of its growth because banks were either unwilling or unable to provide traditional forms of credit, " said Widger. "But Invoice Discounting is now recognised as having significant advantages for our clients. For example, we have some large customers for whom their primary asset is their debtor book. Because they can now leverage on these debts, they can now carry out some major transactions, such as mergers, acquisitions, MBOs and MBIs.

"Invoice Discounting has two main purposes - firstly to support business expansion, but secondly, to offer transaction finance, " he continued. "In many cases, it allows companies to release funds above their requirements for operating capital, which means they can avail of added-value opportunities such as early payments or bulk purchases. People used to see Invoice Discounting as a last resort - now they see it as the lender of best potential."

Of course, sometimes the cash flow problems can lie within the companies themselves, and specifically in their credit management systems.

Many smaller businesses simply could not afford to employ a credit management person, even on a part-time basis, which is why many companies operate their credit management on an ad hoc basis. This would be a risky system even in an ideal world where people paid their debts in full and on time, but in a business environment when some debts need a little encouragement, it is positively counter productive. But in the absence of a dedicated person within a company, credit management is often left to the manager or managing director, who should be spending his or her time better by helping to grow the business.

This is where a factoring company can be so useful.

There are many factoring companies in Ireland who can help businesses in the business of cash flow, but one of the most exciting developments for the Irish marketplace has been the arrival of Bibby Financial Services. Part of the Bibby Group, a shipping dynasty which will celebrate 200 years in business next year, Bibby Financial Services grew from the companies restructuring about 25 years ago. From an initially small enterprise dedicated to factoring, it now employs more than 500 people across three continents, with presences in the US, Australia, the UK and the rest of Europe.

One of the advantages to using Bibby is that, because of its international presences, it can operate its credit management services on an international basis - either export or domestic factoring.

Bibby Financial Services can take over full credit management of a company's ledgers, and can also release some much needed capital into a company's accounts. For example, Bibby Financial Services will turn up to 85% of the value of each sales invoice into cash within 24 hours. The factor will then work alongside people's businesses to collect in any outstanding payments of those invoices from your customers. The remaining 15%, less a small service fee, is paid to the business once payment has been received.

"The major pitfall for SMEs in the Celtic Tiger economy has been overtrading - they take on too much work, and in doing so increase the terms of their credit agreements, thereby putting strain on their cash flow, " said Graham Byrne, regional sales manager of Bibby Financial Services.

"Using a company such as Bibby means that companies can determine their income - they simply build our costs into the bottom line."

Costs that seem insignificant when compared with the price of employing a dedicated person to look after your books - or indeed, when compared with the costs of bad credit management.