Factoring Receivables: Online Process Gets you Money Faster

Posted by John Mauldin on Tue, Sep 03, 2013

Online Factoring Factoring Receivables: Online Process Gets you Money Faster

I have been in the commercial finance industry for seven years.

In the last couple of years I’ve watched advances in modern technology make improving your cash flow super easy and incredibly efficient.

I can remember when I first started as a lowly analyst…….sifting through piles of invoices.  Now over the years things are getting to where it is virtually paperless, this is great for you, especially if you’re financing receivables.

You can access your finance company’s website any time of the day or night.  Submit what you’re wanting to finance or factor.

You can even request funding any time of the day or night.  This is great, if you’re a business owner is always out in the field and don’t necessarily have access

Factoring Receivables……………………………

What’s factoring you ask? Factoring is where you sell your credit worthy receivables to a third party known as a factor.

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

Factoring receivables is incredibly important in this day and age because if you want to run a business successfully, your company must have cash flow. Always remember one thing………………..cash is king!

You need cash to be able to:

-        Pay your employees

-        Buy inventory

-        Pay your vendors

-        Business development…..yes this costs money as well.

What you should know about factoring receivables...…….

There are things you should know about factoring.  What I’d like to do is outline what I feel are the most important things you should know regarding factoring.

  • Bridging the Gap:  Factoring bridges the gap between when you invoice your customer for products or services and when the cash is collected. 

Many companies work really hard to stretch payments to you. Customers can pay upwards in 30, 60, and 90 days.  There’s no way you can adequately pay the bills and your company can adequately cash flow if it’s takes your customers that long to pay you. 

I’ve found that some business owners have a difficult time really keeping their cash flow organized.  Really……most of the time it comes back to one point……trying to adequately manage your receivables and staying on top of collections, which leads into my second point.

  • Accounts Receivable Management:  If you’re a business owner that is having a hard time staying on top of your receivable collections, the factoring company also monitors your receivables (or the ones you factor at least). 

They want to make sure invoices are paid as well.  In their due diligence process they at times find out if there are issues with invoices and can notify you rather quickly.

  • Not a Long Term Commitment and Won’t Break the Bank:  A factoring facility is considered short term financing. If you look into investing in a factoring facility then you’re not invested into a long term commitment to a bank.

The other thing too is while yes there are fees associated with factoring……it won’t break the bank. 

Depending on the factoring company you choose to go with fees can be based on how far an invoice ages out.  If you choose to not factor all of your receivables then maybe look at only factoring your more credit worthy customers that pay faster. By going this route, it could save you in factoring charges while improving your cash flow.

Depending on the factoring company you decide to work with, everything from the application to submitting your invoices for purchasing to requesting funding is done online and is virtually paperless. Approvals can be as quick as a few days.

If you’re not a planner and don’t know what bills are due from one week to the next, or if you own a business and just a need a little help from time to time.  Then consider investing in a factoring facility to help enhance your company’s cash flow.  Best of luck!

Want to know some of the insider tips to use in picking a factoring company? Our free tip sheet, Factoring Business: Insider Tips, addresses many of the myths in factoring advertising and how to best prepare to search for a new factoring company.

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Tags: factoring receivables, Receivables Factoring, Factoring Company