Keeping your head above water in the business sector is challenging. But given our downed economy further complications can arise. For example, businesses often face piles of unpaid invoices and contracts sitting on a desk that collect months of dust, and usher debt to the business. In some cases this results in businesses struggling to make payroll or restock their inventory. At times like this, invoice factoring plays a role in advancing funds to businesses while collecting the debt owed to them.
Sadly, this industry has not marketed itself enough to get substantial recognition. Therefore businesses will seek legal representation or assistance from big banks. When utilizing one of these sources, a business owner will pay extremely high fees and the benefits offer slim pickings. Continue reading to learn a better option.
Costs
When utilizing an invoice factoring service, make sure their rates are no greater than ten percent. It is important to understand factoring fee structures when choosing a company to partner with. But at the end of the day, a company should never ask for money up front. Such a request would be counter productive and completely defeat the purpose of getting a cash advance on your unpaid invoices.
It can take several months before a business gets paid on piled up invoices. Instead of making repetitive phone calls and shooting daily e-mails, you can find a factoring company that can advance you the funds while collecting dues from your clients. The money will appear in your account within a 24-hour window, and the factoring company takes 100 percent of the credit risk. Most of these services provide their expertise with no upfront fees and only require a simple credit check. Once approved most businesses get up to 90 to 96 percent of the amount owed to them with the remaining figure going to pay for the service.
Benefits
There are many benefits to using accounts receivable factoring services. The ability to pay a business every time there are defaulted financial contracts is huge. As a result of these services, entrepreneurs can walk away with a lesson learned while still holding on to their business. This service is also viewed favorably due to the factoring company’s ability to play a role in managing the sales ledger and chasing down customers.
Another benefit to hiring a factoring company is that communication is top drawer. All too often a business is worried that hiring a third-party debt collector could damage valuable relationships with customers. But factoring companies work closely with businesses to collect the dues while maintaining close, valuable client relationships with dedicated communication and sterling etiquette.
Hire an accountant
Once you shake hands and part as friends with your factoring company, you want to do all within your power to ensure that cash flow problems will not strike again. Consider hiring an accountant to oversee your invoices. This will free up your time to do other tasks vital to your business such as optimizing your online presence with YouTube, Facebook and other platforms.
Just remember, seeking a factoring company is not a sign of failure. It shows you are taking initiative and are learning to improve your business.
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Images: ”Paid invoice in a spreadsheet with dollars and pen / Shutterstock.com“
