It seems like 2013 has kind of flown by.  If you own a small business, are you considering your options with regards to your cash flow planning?

If you’ve been contemplating adding a dimension to your cash flow planning, now is no time like the present.

Cash flow planning is an integral part of successfully running a business.  Sure, you may generate the revenue, but if you have customers that can take up to 30, 60, or 90 days to pay.  This can make planning out your cash flow difficult.  It makes it difficult to run your day to day operations:

• Paying employees.
• Buying inventory.
• Paying your vendors.
• Business development.

There are really some great ways to help supplement your cash flow.  You can bring on additional investor (also called an angel investor).  The issue you run into is that you could lose some decision making control. 

Another option is to try to stay on top of your receivable collections.  As mentioned this is easier said than done.  Sure you may have a good rapport with your customer base and stay in constant contact and do a lot of business with them.  There are some though at the end of the day, that will pay when they want.  This leads me to my next option, which I really feel is your most viable option in the end.

Your Most Viable Option:

If you trying to add another element to your cash flow planning, it’s been my experience that factoring your business invoice is your most viable option.

Factoring is a form of receivables financing where you sell your invoices relating to credit worthy customers to a third party known as a factor.

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

Gone are the days of waiting 30, 60, and even 90 days for your invoices to be paid, which can just kill your cash flow.

The Great thing about Factoring……………

This is the part where I say, “but wait there’s more”.

There are so many other benefits to factoring, besides eliminating the whole waiting for up to a month and even longer for your customers to pay.

• Receivables Management:  Factors at times can help in the collection process as they are monitoring your aging as well (or at least the customers you factor).  They can sometimes let you know if there’s an issue with an invoice or a shipment that you may not be immediately aware of.

• Fast and Convenient:  Depending on the factoring company you choose to work with, everything can be done online and is virtually paperless.  This is great, especially if you’re a business owner that may constantly be on the road or working out in the warehouse.  You have the ability to submit invoices you are needing factored any time of the day or night.  You can also submit your funding request online as well.

• Factoring is Considered Short Term Financing:  Factoring is considered short term financing.  You factor an invoice which creates a loan balance, but is paid when the customer pays the invoice.  The other thing to is working with a factor won’t leave you indebted with a bank for an extended period of time.

• Just Factoring What You Need:  Depending on the factoring company you may not have to factor every invoice.  Sure there are some out there that do, but then there are some that won’t require that.  You just simply factor what you need factored to meet your cash flow needs.  To take this a step further, figure out what customers pay the fastest and factor those invoices.  I make this recommendation, because factoring customers that pay faster can save you in factoring costs in the long run.

If you’re weighing out your options, and know something has to be done, then hopefully my advice has helped you in deciding.  I’ve been in the commercial finance industry for seven years, and I’ve seen how factoring helps small businesses like yours succeed and even grow.