Receivables Factoring: An Easy Way to Free Up Cash from Unpaid Invoices

If your business is facing cash flow challenges, account receivables factoring may be the ideal solution to the problem. With receivables factoring, you sell your accounts receivable or invoices to generate quick cash. Receivables factoring is a common practice that’s been used for centuries by businesses around the world to manage cash flow. In fact, receivables factoring transactions in the United States, alone, exceed $60 billion per year, according to the Commercial Finance Association.

Benefits of Receivables Factoring

There are a number of benefits to receivables factoring. A major reason is that it gives you the ability to immediately access cash owed to your company. For some businesses, this minimizes the need to incur debt for operations while waiting for invoices to be paid.

Another advantage of factoring is that it provides a smoother, more consistent cash flow. Instead of wondering if or when you will receive payment from your customers, you can accurately predict when you’ll receive payment based on the terms of your relationship with the receivables factoring company. Businesses typically must wait 30, 60, or even 90 days to receive payment on invoices for products or services that have been delivered. During this time, these funds are tied up and inaccessible to the business. However, receivables factoring can eliminate long billing cycles and enhance cash flow.

Also, factoring eliminates the need for you to handle your own collections. Factoring companies are run by professionals who specialize in collecting and tracking invoices. This translates into an overall reduction in the amount of bad debts and fewer headaches for your business.

Receivables factoring can give you access to cash within 24 hours, which can help you effectively meet short-term cash flow crunches. It also can help you:

o Accelerate cash flow, making it easier to make payroll, pay taxes and fulfill new orders.

o Offer better terms to large customers and increase sales.

o Extend credit to large customers without asking for COD.

o Pay your suppliers faster; take advantage of early pay discounts.

o Purchase equipment, inventory and supplies.

Qualification for Receivables Factoring

Just about every type of industry that generates commercial invoices can and does use receivables factoring. In general, if you pay for labor or materials prior to receiving payment from your customers, factoring can help your business. Or if your business is growing faster than you can generate additional working capital–from private sources or from a bank–factoring can probably provide the cash you need for steady growth. Also, if you have a fairly new business that can’t qualify for bank financing, factoring may be ideal for you.

To qualify for receivables factoring, your company will have to meet to two basic conditions. There can be no existing primary liens on your invoices, meaning no other company should have a claim on the payments when they come in. Also, your customers must also be creditworthy. The factoring company will evaluate your customers on the basis of how quickly they’re likely to pay their invoices.

Prime Candidates for Receivables Factoring

Is your business a prime candidate for receivables factoring? Receivables factoring may be the perfect solution if:

o Long billing cycles are putting a strain on your business cash flow.

o You’re spending too much time collecting from slow paying customers and not enough time building your business?

o The bank has denied your request for a traditional loan because of your lack of years in business, profitability, assets or overall financial strength.

o Your business could increase sales by offering better terms to your new and larger customers.

On the other hand, receivables factoring may not be a good fit if your business is running on low margins–less than 10 percent. Receivables factoring also won’t make sense for your business if you have ample working capital and cash flow isn’t a problem.

How It Works

With receivables factoring, you essentially liquidate or sell outstanding invoices to a factoring company to receive immediate working capital. The company buys the invoice from you for a cash advance amount slightly less than face value, and then later collects the full amount when the receivable is due. Once the factoring company receives full payment for the invoice, you’ll receive the remaining amount–minus a fee. Generally, the receivables factoring fee amounts to three to five percent of the invoice value.

Factoring companies have different fee structures, but factoring fees typically involve:

o Advanced funding – When you send in an invoice to be factored, you’ll usually receive 70 to 90 percent funding of the invoice amount within 24 hours after the invoice has been verified. Then the advanced funding is wired to your business bank account.

o Discount rate or factoring fee – The factoring fee can range between 2.5 percent and 3.5 percent per 30 days, or .1 percent for every day the invoice is unpaid after factoring. (Factoring fees can be customized to the individual needs of your business and customer base.)

o Remainder of the advance minus the factoring fee – When your customer pays the invoice, you will receive the remainder of the advanced funding, minus the factoring fee or discount rate.

Here’s an example of how receivables factoring works. Suppose you have a customer XYZ Company, which owes your business $100,000 for a shipment of your gadgets that were just delivered. XYZ Company is a large customer that has good credit, but they never pay their suppliers (you) any sooner than 45 days. Instead of waiting 45 days to receive payment for your $100,000, you decide to take advantage of receivables factoring. The factoring company verifies your invoice to XYZ Company and you receive 80 percent of the $100,000 ($80,000) within 24 hours, wired to your bank account.

If you have a discount rate similar to the one previously given and XYZ Company pays the $100,000 invoice in about 45 days, this equals a factoring fee of 4.5 percent of the original $100,000 ($4,500). Since you have already received an advance of $80,000 from the factor, you’ll receive the remaining $20,000 minus the factoring fee of $4,500 ($15,500). Ultimately, you’ll collect $95,500 of the original $100,000 invoice.

Keep in mind that the percentage charged by a receivables factoring company is generally more than you would pay for a short-term commercial loan. For that reason, factoring is best used to generate quick cash–not as a long-term solution. Also, receivables factoring companies make their money based on the volume of invoices they purchase. So you may have a slightly harder time finding a factoring company if you have invoices less than $10,000.

Small Business Factoring – Remedy For Cash Flow Problems

When starting out as a business owner, no doubt you considered all the aspects of owning and operating a business. One neglected area of business ownership is cash flow. Neglected that is until the business owner realizes outstanding billed invoices are not being paid in a timely manner and ongoing operations can’t be funded since the necessary cash flow is not coming in as expected. What is the solution for a new business or one that does not have enough established credit to get a line of credit from the bank?

Small business factoring is one solution that offers quick access to cash collateralized by your own accounts receivable or outstanding invoices. First. let’s consider the situation and how cash flow problems came about in the first place. Generally, invoices are sent to customers with Net 30 terms, meaning the balance of the invoice should be paid by the customer within 30 calendar days. As many business owners know, seldom do their customers pay within a 30 day time frame with many going unpaid for sixty days or more. Odds are, your customer is experiencing the same cash flow problems as you, their vendor.

So how can small business factoring be a solution for cash flow problems which plague small and mid-size business? Invoice factoring can provide much needed cash within days rather than weeks for your business. This type of business funding is simple in methodology. For example, once a business supplies goods or a service to a customer and an invoice is generated for the total amount due, rather than sending the invoice to the customer, the invoice is sent to a factoring company.

The factoring company will take the invoice and evaluate the financial worthiness of your customer and if they meet the factoring company’s guidelines, they will send you, the business owner, a check for about eighty percent of the total value of the invoice. The other twenty percent of the outstanding invoice is held in reserve until the invoice is paid in full. Once the invoice is paid, the factoring company will send you another check for the remaining twenty percent less their fee.

The small business owner receives needed cash to operate his business within a few days allowing him to continue operating unencumbered by cash flow shortfalls. The factoring company assumes the risk of collecting the outstanding invoice and collects a fee from the total amount of the invoice. Small business factoring is an excellent solution for cash flow problems affecting your bottom line.

Invoice Factoring: A Tool To Revitalize Your Business

imagine a situation where your company is unable to strike a good deal owing to late payment to be made by its customers. You find yourself to be really missing out on “that big deal.” But now, you don’t really need to face the guilt of missing out such an opportunity. Thanks to the boom of factoring into the financial field! All that you need to do is approach a suitable factor and see yourself getting out of every dilemma.

Compared to loans and lines of credit, which require the clients to have tangible assets and strong financials, invoice factoring [http://1rstfunds.com/Small-Business-Cash-Advance.php] helps one to attain cash easily. Besides, most of the business enterprises today do not qualify for the criterion set by the traditional lending institutions. As such, invoice factoring offers them an excellent opportunity to gear up their business. Factoring allows them to avail immediate capital only at a nominal cost.

Invoice factoring is a blessing for business enterprises that are preparing to grow significantly because the factor takes up a part of the client’s credit risk for the end customers. It involves the factor’s bearing up of the loss in case the debtor fails to pay the invoice. This, therefore, is one of the critical services lent by factors to ambitious business enterprises.

One essential thing to know about factoring is that one doesn’t need to owe anything to the factor. The factor does not advance loans but buys invoices from the client. Since invoice factoring is not a loan, it is easy to qualify for it. All you need is a well-run business along with good customers. These are the only two potential prerequisites needed to avail the benefit of factoring. Many factors, infact, do not even demand high credibility on part of the customers. This makes factoring even more alluring to small business enterprises.

Besides, one of the primary objectives of any enterprise is steady cash flow. If cash flow freezes all of a sudden, there arises an immediate need to convert the receivables into ready cash. Invoice factoring thus offers the unique prospect to regenerate a dying business as it provides certain ancillary services as well as frees up internal resources.

Trans Finance: A Look Into Invoice Financing

In business, the ability to manage cash is something that is mandatory if the business is to be successful. Invoice financing is a term that is used to describe the managing of cash in business. It is very important for a business which is small but has the intention of adding capital so that large business can be grown from it. It is a practical way of being financially free so that the finance that you will need for your cash flow will always be flowing. Invoice financing is something that covers different types of financial options. All of these are integrated in a way that is meant for the growth of the business.

Invoice financing covers three main areas but all have the same goal of setting the growing business free to financial freedom. Factoring of the invoice is one of the areas that are meant to help the company in the management of the business. It covers credit control, sales area as well as the ledger. The factoring part of the finance invoicing is meant to take stock of the credit while at the same time pursue those are debtors so that the cash flow will be smooth. This is one of the areas that a lot of small business neglect while they should really give it importance as it is what will lead to a better management of the resources. Invoice financing therefore comes up with ways that will help the business be in control of their credit.

Invoice Discounting is another area of invoice financing that is almost similar to factoring in that its main aim is to get the business in control of its credit. It will therefore ensure that invoice is well balanced and cleared in good time. It is one of the things that is used to restore confidence to customers on the ability of being trusted with their invoice as well as being in control of the business credits. Most of the large grown business applies this knowledge on the management of their finance and they even have departments that are meant to look into the credit control system.

Asset based lending is another area that is key in invoice financing. The ability to tally and balance the assets is very key in the management of business assets. Lending is one of the ways that is used in business to gain more funds. However, lending cannot be achieved if the assets of that the company is not even sufficient for it to run alone. Assets based lending looks into ways that the assets of the company can be increased so that enough cash can be available for the invoices that are outstanding. They look into ways of increasing property for the company, some equipment as well as the company stock or shares. They therefore come up with ways that can be used in the raising of cash.

Invoice financing is something that has been seen to work. It has not only led to the growth of businesses but also it has birthed new business opportunities. It will reduce the chance and probability of borrowing from financial institutions because of inability of funds.

Things to Consider Before You Turn to SME Invoice Factoring

Invoice factoring sounds like the perfect solution to a small business. Be careful though, my recent experience shows that, in some situations, this may actually be quite detrimental to the cash flow management of your business.

Firstly though, are we all clear on what is invoice factoring?

Invoice factoring takes over all the tasks involved with the running and maintaining of your sales ledger. This covers the tasks of raising your invoices to customers, payment collection and credit control. Furthermore, the factoring company will advance you upto 95% of the value of the invoices raised.

Sounds perfect?

Unfortunately if the factoring company starts to find that your customers are not paying within a set amount of time or they don’t “like” the customers you are dealing with, then they may start to cap your factoring advances. When your funds start to get capped and with no alternative arrangement in place, your cash flow will be instantly stopped and you could find yourself in a very difficult and stressful place.

So, think about your business now and try to manage this situation before the situation starts to manage you!

Here are 3 areas you should think about and how they apply to your small business accounting.

1. You lack visibility of your sales ledger process so will be dependent on Invoice factoring

The problem: Managing your customer invoicing and cash income may seem like an onerous and non priority task to you, especially if you want to be able to focus on growth. Invoice factoring can be a great solution, especially where your costs are heavily incurred upfront, e.g temporary staffing agencies. However, with handing over this processing task to a third party you will loose line of sight and visibility on who are the bad payers, how long is your cash collection cycle and what is the true requirement for working capital for your business. In the early days of your business, this may not be your concern, however as your turnover increases, factoring charges based on your gross turnover will increase proportionately. 4% of £100K may be affordable, 4% of £2m feels expensive.

To manage this situation: Think how long and at what level of turnover the factoring costs, in real terms, will become uncompetitive. Ensure you plan in advance an alternative financing strategy. Look at the terms of your agreement to ensure you will have the option to switch when the time is right and don’t tie yourself in for too great lengths of time on the promise of a lower factoring % today.

2. Slow responsiveness to queries and credit note requests.

The problem: Is it likely that customers will dispute or query invoices due to the nature of your business? Where a large factoring service is used, this will be remote to your offices. Any customers ringing up with queries are likely to be dealt with, in a less personal way than if this function were carried out in house. Customers with queries on invoices often find they don’t get a quick level of response for copy invoices or even agreed credit notes. This all results in payments being held back. Once again, this is going to impact on your advance if your agreement is that you are advanced up to a capped amount based on the age and balance on your sales ledger.

To manage this situation: Check the responsiveness of the factoring company by ringing them yourself. Do you feel happy that your point of contact is responsive to your queries as their customer? Is there cover when your point of contact is not about? If they are not responsive to you, you can bet your customers are getting an even worst service. Check also on the ledger notes and with your contact periodically. What types of queries and requests are being raised by your customers? This can give you an indication of where the process is failing. E.g are customers constantly asking for copies of invoices, could this indicate that invoice are not being sent out in time if at all. Check where you have requested a credit note, how long is it taking to get this credit note raised and you seeing it on the system. What is the principle way invoices and supporting documents are being sent to your customers, post or email and how long is this taking.

3. You have new customers who do not have sufficient trading history.

The problem: Factoring companies really do not like new companies in terms of granting advances on their invoices. With no trading history, they may simply decide not to factor these invoices but will happily take on the invoicing and credit control of these customers. This will all be wrapped up in your fee, so ensure that you understand the factoring company’s criteria for factoring a company for you. If you are paying for credit control, satisfy yourself that the factoring company is chasing your unfactored invoices as vigorously as your factored invoices.

To manage this situation: If there are going to be a number of your customers who are likely to not be factored, then it may be worthwhile you taking on your own credit control of your customers. In terms of the management of your cash, these customers will be critical and will probably need much closer watching until you are satisfied they will pay to terms and will not make an unnecessarily pull on your cash reserves.

Otherwise, check the processing time it takes for your Factoring company to raise, send out and collect payment from your unfactored invoices. Check the lead time your invoice factoring company believes it can work to. Now check with the customer on how quickly they are receiving the invoice. With some of the larger factoring businesses, they do not know themselves so don’t always rely on what they are telling you, carry out your own checks.

Cash Flow Management – Time to Take Control!

Cash flow management is one of the most important and most ignored financial tools available to business owners and managers. Cash flow management is not accounting! Many business owners fail to recognize that the rules of accounting define when and how transactions are recorded in their financial statements, which is no help when they need to manage their cash for next week and next month.

True cash flow management must be based on a cash flow projection, a tool which forecasts the actual date that deposits (revenue) will be made and when, in the future, expenses will be paid. How important is cash flow? Keep in mind that businesses fail every day because they run out of cash, even though their income statement showed the business to be operating profitably.

What to do when you find yourself in a cash crunch? First, understand the factors that drive cash flow and how you can take control. The following factors have the greatest impact on cash flow:

  • Accounts Receivable (time between generating the invoice and depositing the cash)
  • Accounts Payable (time between receiving the invoice for purchases made and your payment of that invoice clearing the bank)
  • Inventory (time between paying for the materials and depositing the income from the sale of the finished product)
  • Capital expenditures (cash out to make the purchase vs. recording depreciation expense over the useful life)

Later in this report, we’ll focus on cash flow projection tools and techniques. Let’s start with some quick fixes that can get you some relief from a cash crunch.

1. Get the Money!

    a. Issue invoices quickly – Don’t wait until the end of the week or month to generate and mail invoicesb. Ask your best customers to accelerate their paymentsc. Offer rewards to customers for quick paymentd. Offer electronic fund transfers as a method of payment to eliminate “it’s in the mail” timee. Include promotional flyers with invoices – Offer perks for quick payments or to promote the launch of your new product or servicef. Require COD on future sales for slow pay customersg. Aggressively pursue unpaid invoices, i.e. one day past the due date

    • Call the customer weekly – Take detailed notes of each call and conversation
    • Involve the owner of the company – Don’t stop at the AP clerk, call the owner directly
    • Create a written collections policy and follow it, don’t be a “softy” – Define hard timeframes for action. For instance, an invoice that is due in 30 days; at 31 days, call the customer: at 45 days, offer a payment plan: at 75 days, turn over to a collections agency: etc…
    • Take legal action sooner rather than later – The longer you wait, the further down the list of creditors you may be
  • b. Restructure your invoices to define a specific date the payment is due. Your invoice should encourage action, not inaction, i.e. “Payment due June 2” is better than “Payment Due in 30 days”.

2. Hold on to your cash as long as you can!

    • a. Prioritize the payment of invoices – All invoices are NOT created equal!

      • Pay the most important invoices first
      • Minimize late fees, finance charges and penalties – Pay invoices with the highest penalties first
    • b. Communicate with your lenders sooner rather than later – Your cash issues will get worse before they get better!

      • Negotiate interest-only payments on loans for the next 6 months, without penalties
      • Never promise anything you cannot deliver, especially with your banker – if you can only pay $300 per month, do NOT agree to pay $500 per month
    • c. Contact suppliers and negotiate extended payment terms,

without

    • penaltiesd. Search for new suppliers that offer longer payment terms
    • Longer payment terms can be much more valuable than a lower price
  • e. Consolidate loans, where possible

3. Convert Assets into CASH!There are many ways to create cash from the assets of your business, some better than others. The following is a list of options for converting assets into cash:

    a. Sell off out-of-date inventory, unused equipment; anything else you have around that’s not making money

    • Pawn shops, Craig’s List, EBay, and inventory liquidation firms are just a few of the options available
  • b. Consider selling your accounts receivables to a Factoring company

    • Factoring companies will buy your accounts receivables, at a discount – You get the cash quickly, they assume the hassle of collecting from the customers
  • c. Consider using leasing companies to sell and then lease back your current assets, such as machinery, equipment, computers, software, phone systems and even office furnitured. Use the inventory you have on hand to secure a loan or line of credit.

Ease your Cash Flow: Invoice Finance

There are several benefits that can be gained when a company decides to invoice finance. A business that deals in the sale of products or services to other businesses will receive the advantage of improved cash flow by using an invoice finance service.

Basically, to invoice finance means to sell or assign your outstanding invoices to an invoice finance company. This company in most cases will give you instant access to a percentage of the total amount of the unpaid invoices assigned to them, commonly from 70-90% of the value of approved invoices. In many cases they may also take responsibility for invoicing, chasing and collecting owed invoices as well as accept a percentage of the loss on unpaid invoices.

Having access to these funds greatly increase the cash flow within your company. Cash on hand for increased production, savings by way of discounts on company expenses, decrease or even elimination of business expenses, and improved opportunities for business loans.

By using an invoice finance service there is no waiting 30-45 days for people who pay on time, and even longer for late payments on invoices. That cash on hand can be more readily available for production, creating an immediate availability for more sales.

Another area the right business can gain greater cash flow from using invoice finance is in taking advantage of discounted payments of business expenses. Many companies offer discounts of as much as 10% if their invoices are paid on receipt or within a certain period of time.

With invoice finance you have cash on hand to pay your bills sooner, rather than having to wait until your customer pays you for your product or service. Increased cash flow also increases your companies purchase power, making it possible to negotiate better terms or discounts from suppliers. The savings in these two areas alone will in most cases outweigh the fee from the invoice finance service.

There are other business expenses that can be cut back or even eliminated when using invoice finance, for example: administration costs, stationery, and office equipment. When adding the expense of employing an accounting clerk, not only their salary but also company benefits, it’s easy to see some great advantages to using an invoice finance service.

Invoice finance can be particularly helpful to a business in the start-up phase. Most lending institutions have strict rules on lending to ‘new businesses’. A bank or lender will only consider a small portion of outstanding (unpaid) invoices owed, often only 40% of the total amount of outstanding invoices, when administering a business loan. By invoice financing your ledger shows cash on hand in place of a large amount tied up in outstanding invoices.

There are some disadvantages to using an invoice finance service. The goods or service your company supplies can have a huge effect on whether your company should use invoice finance. Businesses providing recurring services or product orders are good candidates, while invoices for one-time orders might find it difficult to obtain this type of funding.

These companies prefer to know the debtor and their track record in paying debts before accepting invoices owed by that debtor. Another disadvantage would be if the mark-up sale price of the goods or service provided were less than the amount of the invoice finance fee.

For the right business combining the improved cash flow with a reasonable profit margin along with increased sales orders the business is in a position to expand and the cost to invoice finance can easily be absorbed in increased profitability.

Converting Outstanding Bills Into Quick Cash through Invoice Factoring

Cash flow shortages can happen to almost any business, but invoice factoring can provide a quick, easy solution. Invoice factoring involves the selling of your account receivables or invoices to secure immediate working capital.

Invoice factoring lets you unlock cash that’s tied up in your unpaid invoices. Obtaining cash this way can be an easy, effective tool to solve small or medium size businesses financial challenges. Invoice factoring might be right for your business if you lack adequate working capital to maintain your operations or expand to the next level. Perhaps you’ve considered other options like bank loans, lines of credit or credit cards. But if your company doesn’t have enough financial stability or business credit, invoice factoring could be the perfect alternative to bank financing.

Here’s why: Approval for invoice factoring doesn’t hinge on your company’s credit history. Instead, it depends on the creditworthiness of your customers. Companies that purchase invoices will evaluate your customers based on their stability and payment track record. The invoice factoring company’s main concern is determining how likely your customers will pay and how quickly.

Apart from your customers meeting qualifications, your invoices must also pass certain criteria. There can’t be any existing primary liens on your invoices, meaning no other company should have a claim on the payments once they arrive. This ensures that the company purchasing your invoices has a clear right to collect the funds in your place.

Just about any company that generates commercial invoices can take advantage of invoice factoring. But is invoice factoring right for your business? It could be if your business is struggling to make ends meet because of long billing cycles, you’re wasting time collecting down payments from slow paying clients, you’re unable to take advantage of business opportunities due to lack of funds, or your business isn’t financially strong enough to obtain traditional bank financing.

Advantages of Invoice Factoring Besides providing fast access to capital, invoice factoring offers a number of other important advantages. It gives you unlimited access to funds without adding liability to your balance sheet. Because invoice factoring isn’t a loan, there’s no debt or monthly payments involved. Plus, invoice factoring is a flexible arrangement because it doesn’t require any long-term contracts.

Additionally, invoice factoring makes it easier for you to offer credit terms to customers. This can help you increase your sales without negatively impacting your cash flow. Invoice factoring also can help you take advantage of the early payment discounts many vendors offer on bills within ten days. Ultimately, invoice factoring can help build business credit. The cash flow you create from invoice factoring can make it possible to pay your vendors on time and establish a stronger credit rating. And this can assist you with securing credit from other vendors and financial institutions.

Another significant benefit of invoice factoring is the professional debt collection service provided by the factoring company. The factoring company is equipped to handle debt collections professionally and efficiently, leaving your staff to focus on core activities such as creating more sales. In addition, this will reduce your costs associated with processing invoices and handling collections costs.

How Invoice Factoring Works Invoice factoring is a transaction in which you sell outstanding invoices for immediate cash, instead of waiting the typical 30 days for the invoices to be paid. You receive an up-front, lump-sum payment for your invoices that’s slightly less than face value. The advance payment which can be provided within as little as 24 hours is typically 70 to 90 percent of the total invoice value.

After the purchasing company receives full payment for the invoice, you’ll receive the remaining value minus a ‘factoring’ fee. This fee is based on a number of factors, including your customer’s credit worthiness, the average terms, and the invoice number and size. However, generally, the invoice factoring fee is up to five percent of the invoice value.

To give you an idea about how invoice factoring transactions work, here are some of the main steps in the process:

Step 1: You submit an application to an invoice factoring company.

Step 2: After you’re approved for invoice factoring with the company, you can start forwarding your customers’ invoices to the company for cash advances. (Your customer will receive a bill from the factoring company, which will be responsible for all payments processing activities related to the invoice.)

Step 3: Assuming everything checks out, you’ll be advanced up to 90 percent of the value of the purchased invoices.

Step 4: Your customers most likely submit payments to the company that bought their invoice. This company, in turn, will forward you the remaining, unpaid portion of the invoice excluding the invoice factoring fee, of course.

When choosing an invoice factoring partner, it’s important to select the right kind of company to work with you and your customers. Here are some important considerations to keep in mind:

o What type of reputation and track record does the company have? When you turn over your customers, make sure they’re in good hands and that the factoring company is capable of providing the funding you need.

o How much is the invoice factoring company charging? Evaluate all the components of the price, including any fees, the interest rate and the portion of your invoice that is held back in ‘reserve’.

o What are you going to get for your money? Determine the company’s accounting, reporting and other capabilities.

o How will the invoice factoring company treat your clients? The company will have to communicate with your customers after they take over your invoices. You want to be sure the interaction that takes place is positive. If it isn’t, it may reflect negatively on your own relationship with these customers.

Invoice factoring is a powerful tool for companies needing to meet short-term cash flow needs.

Cash Collecting – 10 Reasons Why Electronic VS Standard Invoicing Wins

Should your business cash collecting be evolving and changing with the technology? In today’s world when everything is becoming virtual overnight, cash collecting has been moving fast towards full automation and paperless existence.

Research by leading IT analysts has found that companies with the fastest-growing profits in their industry sectors are the ones that are changing their document processes and automating them. Businesses with effective document processes in their billings and cash collecting are more likely to experience profit growth and shortening of their cash payment cycle. Unfortunately, for many businesses invoicing and cash collecting still involves manual processes. These inefficient manual steps limit the business ability to achieve objectives such as reducing cash payment cycle and increasing profitability.

Still, many other businesses have now been doing their cash collecting using the latest, fully automated document management technologies, mobile SMS messaging, e-mailing and electronic voicemail delivering. For the same reasons, many businesses have already moved to electronic invoicing and cash collecting.

This is not only a step forward in decreasing the global carbon footprint, electronic invoicing has lots of other added advantages over the standard invoicing. These are 10 big reasons why electronic invoicing and cash collecting vs standard methods always wins:

  1. Web based technology is inexpensive and easy to install.
  2. Substantial business cost reduction (E-billing results in substantial cost savings as no paper printing, mailing and posting of invoices is required).
  3. Instant delivery of invoices (your bills/invoices are being delivered instantly and you can also trace the delivery/reading status).
  4. Shortening of transaction cycles (automation shortens all steps in credit control, from invoicing to collecting).
  5. Invoices could be resent at any time (once in the system and sent to the clients, invoices could be resent at a click of the button many times if required).
  6. No filing is required (your business will save on human resources as the invoicing could be done with less staff, with no filing required).
  7. Easy access to invoices (invoices are accessed at the press of the button at any time).
  8. Significant reduction in Days Past Due (DPD is a measure of the average time to collect receivables. An automated billing system is easily configured to send regular reminders to unpaid bills. This regularity will significantly reduce the payment cycle).
  9. Anyone in your business could be trained to cash collect (using an automated system is simple and easy to use with little training).
  10. Increased productivity and profitability (with fewer manual tasks in accounts receivable, more could be achieved with less people).

As you can see above, automated document management and cash collection has the potential to deliver significant benefits as a result of eliminating document process inefficiencies within cash collection.

Landscape Contractors: Manage Your Cash Flow With Invoice Factoring

The market of landscaping comes in many forms from commercial and residential contractors, architects, grounds departments to educational institutions and suppliers. No matter what part of landscaping your business falls under there is always a need for managing your cash flow to grow. Have you been turned down for bank financing or have an inadequate bank line of credit? If so, invoice factoring may offer your business the assistance you have been seeking. In today’s instantaneous world, landscaping contractors now have access to working capital with quick turnaround. In some cases your business can immediately receive cash the day after the invoice is generated. In addition, factoring gives you a way to manage cash flow while eliminating the uncertainty of when invoices get paid. Whether you are a start-up company or a seasoned business, invoice factoring can help to guarantee your monthly accounts receivable.

In these uncertain economic times, many commercial businesses and residential property owners are stretching payments out longer and longer, oftentimes delaying payments owed for months. Because of this, many landscaping businesses need to quickly raise cash just to stay afloat. With predictable cash flow, landscaping businesses can reap the benefits of receiving their money as soon as the services or rendered goods are delivered. In addition, invoice factoring provides freedom from accounts receivable collections and allows the company to do what they do best… landscaping. Factoring companies specialize in the following:

• Often can fund your invoices the very next business day.
• Give your landscaping business steady and predictable cash flow.
• Give you access to working capital for your business.
• Can often work around IRS tax liens, personal credit issues or client concentration problems.

As a result of the above, landscape contractors now have a workable option when wanting to expand their company for future success. For example, commercial and residential landscaping businesses can be labor intensive which oftentimes require a need for large payrolls. As landscaping companies expand their business, so does the need for additional working capital to cover expenses such as payroll or light/heavy equipment purchases. By choosing a factoring company, landscaping businesses now have the opportunity to avoid asking for embarrassing deposits for job funding; fund all types of maintenance including government, municipal, commercial and residential landscaping jobs; pay cash for materials and supplies that are needed; and pay vendors on time improving credit standing. Now landscaping businesses can live with a sense of confidence knowing that they will have quick access to working capital.

It has been predicted that the landscape industry is expected to grow as much as 13% in the next five years. In order to manage this growth, factoring can provide these businesses an efficient way to manage their cash flow with predictable working capital. By offering immediate access to cash, invoice factoring companies provide landscaping businesses the ability to bring their ideas to life, expand their customer base, and grow their businesses into the future.