It’s not a big secret: if you own a small business you must have cash in order for your business to survive.

It’s pretty simple: you need cash to complete the day-to-day tasks:

• Pay your employees
• Pay your vendors
• Buy inventory

You must have cash. Cash comes from several different

sources, including from converting your accounts receivables into cash. We all know how hard this process is at times. There are some customers out there who won’t pay for 30, 60 and even 90 days, no matter how strong your relationship is. 

This makes life really difficult if you own a business that is seasonal or has multiple operating cycles.

How To Improve Your Cash Flow
For those of you who are organized business planners, you probably already do a good job of planning out your cash flow and constantly look for ways to improve cash flow. But all of us run into tight spots where we need to think about improving cash flow. There are many ways to raise cash aside from efficiently turning your receivables:

• Bring in an outside investor, also known as an angel investor. The issue you run into with this is that you lose some control and decision-making ability in your business.

• Invest in a factoring program. A factoring program is a form of small business financing where you sell the receivables of your creditworthy customers to a third party known as a factor. There are two types of factoring, recourse and non-recourse, recourse being the most common. Recourse factoring is where, as the client, you take financial responsibility should an issue arise with any particular invoice. 

The Reasons To Choose Factoring

• Closing the gap: Factoring helps bridge that gap between when you bill your customer for products or services and when the invoice is collected. 

Many companies work as hard as possible to stretch payments to you. Customers typically pay upwards of 30, 60 and even 90 days. There’s no way to adequately pay the bills if it’s taking that long to collect your receivables. 

All too often we’ve seen some business owners out there having a difficult time keeping their cash flow organized. It almost always comes back to one point: trying to adequately manage receivables.

• Accounts receivable management: If you feel you have a difficult time staying on top of your receivables, the factoring company also monitors your factored receivables. 

They want to make sure invoices are paid as much as you do. In their due diligence process, the factoring company finds out if there are issues with invoices and notify you quickly.

• Not a long-term commitment and won’t break the bank: A factoring line is considered short-term financing. If you look into taking out a factoring line, then you’re not looking at a long-term commitment to a bank.

While there are fees for improving your cash flow with factoring, they won’t break the bank. Depending on the factoring company you choose to go with, fees are based on how far an invoice ages out. It’s even possible to factor your customers who pay the fastest, instead of factoring all your receivables. This saves you some money while improving your cash flow.

To run a business successfully, cash flow management is vital. Obtaining financing through a factoring company is a great way to help manage your cash flow. When you do business with a third-party factoring company you find the cash flow assistance you need. 

There are a multitude of choices available to business owners interested in obtaining receivables financing. Download our free report: Accounts Receivable Loans: What Are The Options? to learn about these choices or call 888.833.2286 to speak with one of our Cash Flow Consultants today!