Monthly Archives: March 2017

Improving Business Cash Flow

If you have a small to mid-size business, it is highly likely that you suffer from business cash flow concerns. A steady cash flow not only keeps your business solvent, but it also enables you to grow your business because you lack working capital. The most common factor in lack of working capital is offering payment terms to your customers.

One of the most frequent negotiating terms for new customers is the amount of time they have to pay you for your products or services. A small business owner will accept the payback terms of 30, 45, or even 60 days to get the business. However, you are expected to deliver your products or services immediately and wait for your payment for up to 60 days.

It doesn’t take long to have a great amount of your money tied up in unpaid invoices if you offer payment terms to your customers. It is very possible to have more money in accounts receivables than in cash in the bank. Eventually you will hit a wall. You won’t be able to offer any more product or services until your unpaid invoices are paid. You won’t be able to make payroll or pay your suppliers.

Your unpaid invoices can be an asset. How? They can be turned into needed funds through invoice factoring, also known as invoice financing and invoice discounting. What is invoice factoring?

For example, if one of you customers is a very reputable company such as BT and they owe you £10,000 in 45 days, are you pretty sure they’ll pay? That invoice is almost as good as having the £10,000 in your hands now. And if you have unpaid invoices from several reputable companies, the invoice factoring company will be glad to take those invoices off your hands in exchange for instant cash now.

You will not be in debt to the invoice factoring company because they do not loan money to you. Instead, they actually buy your invoices at a small discount. It is easy to qualify because they do not look at your business credit in order to buy your invoices. They look at the credit of the companies who owe you.

Now it is the factoring company who waits to be paid rather than you the small business owner. This plan works well for small businesses that have turned away new business because of a high percentage of unpaid invoices that hinders cash flow.

Factoring and invoice finance services are commonly used within the recruitment industry as well as many other industries that send out large numbers of invoices very frequently. If your business is suffering from cash flow problems and these are preventing you from operating efficiently or expanding then a factoring service may well help to relieve these problems. An invoice financier will be able to tell you the most suitable service and whether or not your business is suitable for this type of service, there are many factoring companies online that can provide these services.

What to Look for When Selling Your Invoices

If you are worried about your business’ cash flow spiraling down, then maybe it’s the right time to make a major decision to improve the situation. Low cash reserves are not indicative of your organization’s true financial health. Rather, it sometimes happens when a company is growing fast, and in the process, creates invoices for receiving payments from its customers. These invoiced payments are not always received immediately. Usually, there are invoice terms such as 15, 30, 45 days or more that are provided to the customers. Often, these payment terms are extended for the customers’ convenience. During this period, an urgent requirement for cash may crop up. Your business may need money to pay your employees’ salaries, to pay the rent or the electrical bill, or for buying new equipment and other expenses. In such a critical situation, conventional lending could be get difficult to get. For a solution, you can turn to professional invoice factoring companies that can fund your business with immediate cash after buying your receivables or invoices.

As a business owner you would surely want a company that will provide cash in quick time, pay personal attention to your financial needs, and deal with you in a professional and empathetic manner. Furthermore, you also want to be sure that the A/R factoring company is a principle funding company, and not a broker. Principle invoice factoring companies are financially strong and use their own capital for direct funding that makes the processing fast and efficient. The company will help you expedite funding arrangements by purchasing your invoices at a discounted rate. You will receive the required cash that is equivalent to the face value of the invoices you sell. You can factor single or multiple invoices as and when needed. So, this could be a great funding option for your business even amidst the gloomy economy and indifferent credit market.

While choosing an A/R financing company, you can consider the following factors:

1.Quick Turnaround Time
During urgent cash requirement, even an additional day taken for processing can make or break a situation. So, the company’s services should be highly responsive to meet your instant financial needs. Ideally, an efficient company takes about 4 days to approve funds, and for subsequent applications, it can provide funding within 24 hours.

2.Reliable Service
The company you choose should be reliable so that your cash flow issue can be solved on an urgent basis. It should be able to complete the invoice verification process, credit approval, processing invoices, and remittance of funds quickly and efficiently.

3.Amount of Cash Advance
When you are desperately looking for funds to pay off your business’ short term obligations, you need maximum of cash as an advance. If you have a current and valid invoice, a good company can pay up to 90% of invoice value in advance.

4.Convenience Provided
You should feel comfortable dealing with your chosen company. Convenience provided by the company can lead to a long term business relationship. A good company provides flexibility considering your business situation, and that can save you from delays and the hassles of processing.

5.Simple Application Process
While factoring, the last thing you want is a long and complex application process. Make sure the company is not charging any fees or penalties, except the discount fee. Also, there should not be any long term contracts to bind you.

Before availing such services, you can check for online information related to factoring or call up a relevant company for more details. This will help you clear your doubts before making the final move.