Your bottom line……………… when the dust settles and the smoke clears…………… that’s probably what you’re looking at.

Profits are more than important, but at the same time your company must cash flow and have adequate working capital to efficiently operate.

Cash flow starts with your operating cycle and turning your business invoices into cash.

We all know that collecting your receivables can take up to 30, 60, or even 90 days.  We all know you can’t efficiently operate your business when it takes that long to collect an invoice.

Bridging the Gap……………………..

If you’re trying to bridge the gap between when an invoice is billed and collected, then you may want to turn to a form of small business financing known as factoring.

Factoring is where you simply sell your accounts receivables relating to credit worthy customers to a third party known as a factoring company.  There are many factoring companies out there so be sure to do your research.

Advance rates vary, but are typically around 80%.  When the invoice is paid you get the remaining portion back less any applicable fees.

Factoring Companies and Your Bottom Line……………………………….

It’s pretty simple…………..factoring companies and the services they provide really do impact your bottom line.  Here are four ways that which they do:

1)      Cash Flow:  As I’ve said cash is king.  I’m not sure if I can say that enough.  You need to have cash to for just normal day to day operations. 

One thing that stands out to me is inventory.  You have to make sure you have plenty of inventory so you can keep your customers happy. 

In order to do that you have to keep your vendors happy.  You have to have inventory to sell to your customers.  You can’t buy that inventory if it’s taking your customer’s upwards to 90 days to pay you.  Not saying all of your customers do that, but I’m there’s some that can take a little bit to pay you.

2)      Business Development:  The services a factoring company provides not only help pay the vendors, but they can help in business development and growing your business. 

Yes……this costs money as well.  Part of growing your bottom line is building your customer base and growing your businesses revenue.  You can’t do that if you don’t have the working capital.  That is where factoring your accounts receivables really comes into play.

3)      Marketing:  Selling your business is more than important.  It really falls under business development, but I wanted to enter this under a separate entry because in order to successfully sell your company you must have a good marketing strategy.

To have a solid marketing strategy you probably either need to bring someone on that has a solid and proven background in marketing or hire a marketing firm that also has a proven track record.

At the end of the day………………….which ever route you choose to go, you must have the cash to pay whomever you decide to hire or whichever company you decide to go with.

4)      Quality Labor:  It always goes back to one point cash.  I’m not sure if I can reiterate it enough……CASH IS KING.  Factoring your accounts receivables gets the cash you need to successfully operate your business.

One thing you definitely could put your cash to good use on is labor………….quality labor.  No matter what industry your company is in, if you want quality labor putting out a quality product, you need to pay for it.

Remember one important thing………..cash is king.  In order to successfully run a business you must have cash.  If you feel like things are running smoothly, still consider having a factoring line because it really can help your bottom line.  Not to mention, it’s a great level of security to have with your company to ensure your business continues to succeed.