If you run a business, at some point you’ve probably had to deal with bad debt. It’s a fact of life—some customers just don’t pay their bills on time. This can be a problem for your cash flow, especially if the customer owes you thousands of pounds or dollars.
Fortunately, Invoice Factoring can help solve this problem by providing fast access to funds that would otherwise have lain dormant in accounts receivable departments.
Get cash immediately
Invoice factoring is a way to get paid immediately. It’s a tool that can boost your cash flow, allowing you to use the money for your business or personal reasons—whatever you choose.
The benefits of invoice factoring include:
- Filling a financing gap until funding becomes available
- Achieving fast payment for invoices
- Quick access to funds
Eliminate bad debt risk
Invoice Financing Companies are a simple and effective way of reducing your risk of bad debts. The factoring company will pay you on time, so you don’t have to chase payments.
In addition, they have a strong credit rating which means that their clients are more likely to pay them than they are to default on the invoice.
Save time and money on administration
Invoice factoring can save you time and money on administration. You can:
- Eliminate the cost of collecting and chasing payments. Invoice factoring means that your customers pay directly, so your invoices are paid faster than with traditional banking services like a business loan or overdraft.
- This is particularly important for small businesses that have limited resources to spend on administration and payment collection.
- Eliminate the cost of paying staff to process invoices. If you’re paying someone else to do the work, invoice factoring means that you no longer need their skills or services, which will save your business money in both salary expenses and recruitment costs.
- Cut down on accounting/bookkeeping costs by using one simple statement each month instead of multiple statements from multiple suppliers every day (or week).
Learn from your invoicing data
The invoice factoring process is one that can help your business in many ways, but before you dive into this new method of financing, it’s important to understand how invoice factoring works and whether it’s appropriate for your business.
Here are some ways to learn from your invoicing data:
- Understand the cash flow of your business and its profit margins. You should be able to see when you’ll have enough money to pay back a loan if necessary. You may even find that factoring invoices could increase profits as well!
- Learn which customers are slow payers so they can be flagged in future transactions or direct mailings (this will help prevent cash flow issues).
- If possible, charge more for goods or services from slow-paying clients—it will encourage them to pay faster while also making up some lost profits (and maybe even turning a profit on the deal).
- Understand which products or services are profitable so you know where best to place future investments when growing an already successful venture.
Invoice factoring is appropriate for many businesses.
Invoice factoring is an excellent option for many businesses, but it’s not right for every company.
Invoice factoring is a good choice if:
- You need cash quickly
- Your business has a high percentage of credit sales (more than 50%)
- Your current bank terms are too restrictive, such as requiring large deposits or charging high fees
If any of these apply to you and your business, then invoice factoring could be the right solution. But even if none do, you might still want to consider using this type of financing method—just keep in mind that there are some things to watch out for.
Invoice factoring is a great way to get more money in your bank account, fast. It can also help you identify cash flow issues and improve your ability to grow your business. If you’re still not sure whether invoice factoring is right for you, consider contacting an expert who can help make sense of the process.