Tweak Your Biz » Finance » Top 10 Reasons Why Invoice Factoring Is The Most Reliable Form Of Business Financing

Top 10 Reasons Why Invoice Factoring Is The Most Reliable Form Of Business Financing



Small and medium sized enterprises seeking finance may want to consider invoice factoring. Invoice factoring is an example of how traditional financial arrangements are entering into new accounting practices toward sustainability.

Here are 10 reasons why Invoice Factoring is the most reliable form of business financing.

# 1. Accounting Principle

Invoice factoring standards allow for more cash flow flexibility in accounting. An accounting principle used in a range of industries, invoice factoring turns outstanding accounts receivables into profit.

# 2. Balance Sheet

Invoice discounting and invoice factoring are both viable options for making sure that balance sheets are on target. Cash flow is a critical mechanism for ensuring that a business is able to resolve accounting expenses normally.

Invoice factoring

# 3. Liquidity

Like debt trading, invoice discounting factoring produces immediate liquidity for companies seeking alternatives to traditional bank lending. Availability of capital is almost immediate compared to bank application for credit so that expenses (i.e. equipment, payroll, rent, and utilities) can be covered for on short notice.

# 4. Sustainability

It can be especially pressing to manage accounts during delay of an entire billing cycle. Invoice discounting and invoice factoring release cash for expenses that might otherwise force temporary or even final closure or sale of a business. A great secondary source of commercial finance, invoice factoring allow struggling businesses to stay afloat during poor performance periods or delayed payment by customers or other payers.

# 5. Billing Obligation

Advance of funds by an invoice factoring company means that accounts receivables are collateral for lending agreements sustained by the promise to pay at time of collection on those outstanding invoices. When a factoring trader purchases invoices, assuming billing obligation on a retailer or other business accounts receivable, invoice factoring is in effect. This is distinct from invoice discounting which allows businesses to retain control over billing while loosening the strings on cash flow so that other obligations to suppliers and payees can be met.

# 6. Uninterrupted Service

One reason why this is a great option for businesses is that you get the monetary benefit of selling your invoices – immediate working capital – but your billing process does not have to be interrupted and your customers do not have to be aware of the factoring arrangement you have made with the discounting company.

# 7. Rate Variability

Accrued expenses over time can often exceed the cost of service rates. By tendering your invoices for capital lending, you can sustain your own financial obligations in the short term. Similar to traditional commercial finance, invoice discounting factoring varies in terms of percentage rate paid on service. Some traders charge more than others, and in most cases invoice discount factoring services are far higher than standard lending contracts.

# 8. Discretionary Service

Invoice factoring companies provide private service. Businesses looking for the best deal in invoice factoring may find that some research is required. Sourcing reputable, reasonably priced invoice factoring services is advised.

# 9. Industry Specialization

Many invoice factoring companies focus on target sectors. For instance, a business may require additional assistance in recuperation on billing due to lack of in-house support. Searching for an invoice discounting factoring service targeting businesses in that industry will reduce risks in the debt collection process. By narrowing your search to a specialist, the best possible returns are likely.

# 10. Risk Reduction

By speaking to someone involved in invoice discounting factoring or another professional in your sector, time, money and hassle may be eliminated. Third party representatives working as B2B brokers are an alternative to conducting what may become a lengthy search. Intermediary agents reduce confusion via a professional broker community. Many of these intermediaries are now online auction forums for open bidding on invoices. It is that easy. join, post, and compare bids prior to making the decision.

Finding an invoice discounting factoring company through your chamber of commerce, online financial advisory in your sector or through a network of existing business contacts means that recommendation prefaces the relationship. The sheer number of factoring and invoice discounting businesses can be daunting without advice.

For more information on invoice discounting factoring services, contact your local industry affiliation for details about how you can benefit from the sale of outstanding accounts payable.

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Images:  ”Received Invoice Shutterstock.com



The Author:

Andrew Cravenho is the CEO of Factor Auction & CBAC LLC, innovative invoice financing exchange. As a serial entrepreneur, Andrew focuses on helping both small and medium sized businesses take control of their cash flow. Prior to CBAC, Andrew founded an annuity financing company relieving tort victims of financial hardship https://cbacfunding.com/blog/

Add Your Comment

  • Anonymous

    Great post Jackie, I am fiend for waking up in the middle if the night and writing down my thoughts in the notepad that sits beside my bed. Some of my biggest business obstacles have been removed at 3am.

  • http://www.seefincoaching.com/blog Elaine Rogers

    Great ideas Jackie, I hope I remember them when I am on the plane later :)
    I started using a little notebook when i am out and about, and use the notes section of my phone.
    It’s easy to buy a notebook, it’s remembering to acknowledge that we have the idea in the first place!

    I often dismiss ideas that wander into my head, but I think you are right – they should be written down no matter what!!! You just never know :)

    Great post, and great reminders of how to capture those thoughts. Notebook beside the bed can help at night, because they are so deep within our subconscious, the busyness of the day that follows, can cloud those thoughts

  • http://www.click2engage.com/ Sabina

    Good sensible advice Jackie! I enjoyed reading your post. And I agree with Elaine on the fact that having a notebook around to gather those ideas is one thing, but acknowledging the idea and jotting it down is certainly where I fall down by quickly dismissing them as rubbish. But then again, your remarks on testing the idea, before either dismissing it or implementing it, make perfect sense. This thought should go at the very top of my idea list now! :)

  • Elaine

    Great Jackie. If I write something down I usually remember it, especially a name. If I don’t write it down I usually forget it. Good starting point here.

  • http://www.consultingexcellence.ie Jackie Prendergast

    Good for you Greg!!

  • http://www.consultingexcellence.ie Jackie Prendergast

    The problem with dismissing them too quickly is that a) with a little tweaking they could have been great ideas or b) they may have led you to an even better idea! So let the inspiration flow!

  • http://www.consultingexcellence.ie Jackie Prendergast

    Would be interesting to hear how that benefits you after a few weeks / months – hopefully it will help you capture a great idea!

  • http://www.consultingexcellence.ie Jackie Prendergast

    Thanks – now of course I need to spend more time practising what I preach:-)

  • http://www.btbtraining.com/blog Niall Devitt

    Great tips Jackie, I think you are so right when you advise finding a method of instantly recording that suits you. There are so many ways you can do this but I tend to find the humble pen and paper the easiest to achieve. Thanks for sharing, another gem of a post :-)

  • http://www.encouragingexcellence.ie/ Mairéad Kelly

    Great tips. I send myself a message on my phone if I don’t have somewhere else to write it down. It is amazing how a few months on an idea can take shape when it’s been left to sow in the dark and a second airing gives it new life.

  • http://blog.myprojecttracker.com Barney Austen

    Brilliant post. Ideas and inspiration can hit at any time and you have to make sure they are captured. Like Greg, the 3 a.m. wake-up can often deliver some great ideas – but unless I note them down, I can never remember them. Some are obviously awful in the cold light day – but some, just some are real gems!

  • http://bettercloser.com Bill Rice

    Isn’t funny we often think we are running out of ideas or inspiration. I think you just reminded us that often that is because we’re not effectively capturing and nurturing it–as it happens. Great post!

  • Anonymous

    Love how you make the process so accessible! Truly it is important to find a personalised system for getting your ideas out of your head. Maybe in the cold light of day, the idea is ridiculous, then again…

    Creativity is much like a muscle. Stifle it with procrastination or editing your ideas too soon and it gets atrophied. Since our markets change, we need this entrepreneurial quality to stay viable and beyond. By using your strategies, nothing gets lost and the ideas are accessible whenever the time is right.

  • http://www.consultingexcellence.ie Jackie Prendergast

    I am inclined to agree – some times simple is best!

  • http://www.consultingexcellence.ie Jackie Prendergast

    It is a bit like a fermentation process I guess! And I think reviewing your list (or whatever) of ideas regularly will always throw up something different or new. Thanks for the comments Mairead.

  • http://www.consultingexcellence.ie Jackie Prendergast

    Thanks Barney. Glad to hear I am not the only one suffering with “Brain rush” at 3 in the morning!!

  • http://www.consultingexcellence.ie Jackie Prendergast

    Exactly – as Elaine Rogers said it is about acknowledging the ideas we do have. Once we do that we start to realise that we are all creative in our own way.

  • http://www.consultingexcellence.ie Jackie Prendergast

    Amen to that Elli! I never quite thought of it as my procrastination stifling my creativity but you are absolutely right. So here’s to more courage to try out those ideas we already have and wisdom to recognise the next ones that come our way!

  • http://www.wchingya.com wchingya

    You know what I love best about this article, is the emphasizing on ‘practical’. As a blogger I find myself constantly in search of inspirations and ideas. What I dread most is to lose them when I had it that very second! I always keep my phone at hand, if I don’t have the pen/paper with me, I’ll record it instead. I’ve tried while composing a song, article to be submitted to local newspaper even silly ideas I could do for my hubby’s birthday. lol.. Not every idea is good but I’ll take #5 as reminder, always: evaluate!

    Well done, Jackie. Love your article!

    @wchingya
    Social/Blogging Tracker

  • Martin Lindeskog

    Have you read Grant Thornton’s report on how invoice payment times vary dramatically around the world? 10 years ago, average days for payment of sales invoices in:

    Italy – 83 days

    Ireland – 59 days

    USA – 40 days

    https://www.internationalbusinessreport.com/Press-room/2004/new-research.asp

    Do you think that this payment pattern has changed 10 years later? Factoring must be a reliable form of getting paid in time at several places around the world.

  • factoring financial services

    Invoice factory are so receiving with different accounting and rangable industries. The obligations suppliers are so traders with factoring retailers.

  • http://www.thesmarttrain.com/ Elaine Rogers

    I often get frustrated that people cannot just pay on time. I know there is so much at stake by witholding money, on both sides, but the small business owner is always the one to lose out the most – especially with cash-flow.
    That has a knock-on effect – they don’t get paid, so cannot pay the other small business who provides services, and on and on.
    And we have to pay the big companies up front, or on time! No lee-way. Rant over!

    Andrew, great post and I agree about discounting – I use it to get paid on or before time – improves my cash-flow immensely.
    I enjoyed especially your points 3 and 4, especially for the medium size business or HTSU that is expanding quickly – and finance is desperately needed.

  • LucieM

    . While
    some people my view invoice factoring as an “expensive” form of finance, is
    probably costs the business a lot more to turn away business than it does to
    pay a little extra to borrow money. Factor receivables at a bank

  • karl krueger

    Mainly because there are hardly any alternatives that can enable cash flow so quickly and safely. Sustainability is another big advantage of course.