No matter the industry (manufacturing, distribution, construction or services) there is one common thing that is needed for your business to be successful and survive.

Do you have an idea what that is? If you guessed cash, then you’re right! If there’s
one point we’ve tried to drive home it is that
cash is king!

Your biggest source of cash is collecting your accounts receivable. We all know how hard it is to efficiently manage your receivables. No matter how good a rapport you may have with your customers, there are just some businesses out there that won’t pay for 30, 60 or 90 days.

This makes things incredibly difficult for you to run your business and efficiently manage your cash flow. It makes it even worse if you have a difficult time keeping your business well organized.

There are a number of options for improving cash flow and end the worrying about how to make payroll.

Payroll Financing
Maybe in the past you’ve searched out financing from lenders and other banking institutions to help supplement your cash flow. In the current economic climate you may find it somewhat difficult to obtain traditional bank financing, but you may be able to turn another type of lender. One option would be to work with a factoring company.

Factoring is where you sell your creditworthy receivables to a third party known as a factoring company. Invoices are sold at a specific advance rate, which is typically around 80%. Once the invoice is paid, you get the remaining percentage back less any applicable fees.

Factoring is a great way to bridge the gap between when an invoice is billed and the cash is collected. You eliminate the 30, 60 and even 90 day wait time to get paid. 

Factoring Benefits
If you’re feeling a little apprehensive about factoring, then here are some benefits to put your mind at ease:

• Depending on the factoring company, setting up a factoring line is easy and relatively quick to establish.
• You don’t have to factor every invoice. If you have a large order with extended terms, consider factoring only the invoice related to that order.
• Some factors conduct all of their business online. 
• Factoring is considered short-term financing, so you aren’t indebted to a lending institution (like a bank) for an extended length of time.

Helpful Tips
If you decide to pursue a factoring program, here are some helpful tips when factoring invoices:

• Consider factoring all of your receivables (if possible). This really gets your business organized and gives you peace of mind with solid cash flow.

• Stop extending quick pay discounts to your customers. By factoring your receivables, you are getting the cash you need without offering a discount. We’ve seen customers take advantage of the discount even if they’re paying outside of the required time frame. 

• If all you need is just a little cash flow help, factor only select receivables from your most creditworthy customers. Your more creditworthy customers may pay quickly, minimizing your factoring costs while meeting your immediate cash needs.

Want to see how factoring would work for your business? Download our FREE Small Business Factoring Guide below or call 888.833.2286 to speak with a Cash Flow Consultant today.