5 Tips to Reduce Your Operating Costs

What you pay for the day-to-day operations of your business is called your operating costs. Understanding these costs and working to reduce them where possible is important to have a more successful and financially stable business. 

Problems such as poor cash flow and small margins can be reduced if you focus on spending less money on running the business. However, you have to reduce operating costs carefully to be sure that you don’t sacrifice the quality that you deliver to your clients and customers. Otherwise, you’ll undermine your company’s reputation and growth. It's a tough balancing act, but here are five tips to help you reduce your operating costs without negatively impacting your business.

1. Start with Software

Many owners of small and medium sized enterprises do things by hand when there are software options that can do it for them. When you use software, you save yourself and other staff time, promoting efficiency and reducing your operating costs. There are many different software options to consider, including those for marketing, accounting, customer relationship management and more. Consider whether you’re spending a lot of time on something a computer could handle for you.

2. Outsourcing

Staffing is a huge cost, so you should also consider outsourcing where you can, not just to save on staffing costs but also to get better results than you might be able to achieve yourself. A specialist in a field may be able to get you better marketing results, better legal advice, and more. Their guidance can help you make better use of your resources, saving you in the long run.

3. Change Suppliers and Vendors

You likely have a strong relationship with your suppliers’ vendors, but it is simply good business practice to also look elsewhere to see if you can lower your costs. If you have ongoing orders at a supplier, then you may be able to negotiate a discount for your business. Or your supplier may be willing to match lower prices that you’ve found elsewhere.

Consider setting up a quoting process and getting at least two other quotes. This will help keep your vendors competitive even if you keep choosing them over other options. Be sure that you’re providing enough information that all of your quotes are accurate, or newcomers may underestimate the job and quote too low (which could cost you money in the long run).

4. Lose the Office Space

Do you really need to have office space, or at least as much as you do right now? By allowing employees to work remotely, you can significantly reduce your operating costs. You don’t need to sacrifice connectivity to do this. There are plenty of online tools to keep you in touch with your employees and monitor their progress on assigned tasks.

5. Energy-Efficiency

Perhaps you have to have an office space to meet customers or host employees? Then you can try to reduce your costs by making the office more energy-efficient and green. Better insulation or HVAC equipment can reduce your monthly utility costs.

While many of these tips may increase your up-front costs temporarily, you should find that they overall lower your operating costs enough to make up for this, and then benefit you, after several months. In the end you’ll have a healthier cash flow and stronger business overall. Invoice factoring can help with that too. Reach out to us at J D Factors to discuss how.

 

What You Need to Know about the Emerging B2B Ecommerce Market

Some B2B companies already had ecommerce sites set up to serve their customers. However, with Covid-19 preventing most traditional in-person sales, even more B2B companies are adopting an ecommerce model that allows customers to order much in the same way as B2C consumers purchase items on sites like Amazon. According to Forbes, B2B ecommerce has become one of the fastest growing segments for both new and established companies. Forrester Research projects that B2B ecommerce will make up 17% of all B2B sales in the United States by 2023.

If you’re considering creating an ecommerce site for your company, there are a few things to consider. Making the move from a personal, face-to-face sales process to an online one can boost convenience, and works especially well for companies that need to connect with younger buyers, but it has its pitfalls too. Here is what you need to know about B2B ecommerce.

General benefits of moving to ecommerce

Larger customer base: Moving online allows you to access a much wider base of customers. So long as you can ship your product or offer your service in their area, you can reach them online. Ecommerce is a key tool to expand your business.

• Convenience for customers: Customers find ecommerce to be highly convenient. They can access the store at any time, see their past purchases to buy again more confidently, look through product specifications at their leisure, and use new payment options.
• Avoid credit card fees: The world of ecommerce provides access to other payment options that may charge you less in terms of fees than traditional credit card providers. Some of your customers may prefer to avoid using credit cards as well.
• Customer loyalty programs: It can be easier to implement a customer loyalty program through an ecommerce site. These programs provide their own benefits to you, like providing a wealth of customer data and intelligence.
• Competition: As ecommerce has not been adopted widely across all industries, it may be a great opportunity for you to get a leg up on the competition.

Potential issues when adopting ecommerce

Starting up an ecommerce site for your business can be rewarding but is expensive and also brings risk, like any business change. You can protect your business from these issues ahead of time if you consider them first.

One issue is meeting customer expectations. Delivery expectations for clients are higher when they are buying online. They compare the experience to consumer-facing ecommerce and expect quick shipping, fast updates on shipping progress and more.

Web development has its pitfalls as well. You’ll need a highly intuitive and functional website right from the start, or you could deter customers who have bad experiences using your website's new functionality. You’ll also need a platform that is secure to protect your customer’s information.

Creating a website that can meet these needs can be expensive. Invoice factoring can help you build up the cash reserves to afford a quality website right from the start, by giving you access to your revenue the moment you send out an invoice. Many businesses work with companies like J D Factors to fund their growth and development, too. With invoice factoring, the factoring company pays you what you invoice your customer, minus a fee, and collects from the customer on your behalf. In the meantime, you can use that cash to fund initiatives like developing an ecommerce website.

J D Factors offers factoring services that can help you grow your business with ecommerce solutions, or in other ways. Contact us today to learn more.

Use Factoring to Get Control of Your Cash Flow in 2021

Looking to get your company's cash flow under control in 2021? You're not alone. Over the last year, you may have found that many of your customers are slow to pay as they deal with the fallout from COVID-19. These delays have ramifications for your business, reducing your ability to buy supplies, pay staff, and keep your business running.

Invoice factoring is a simple solution to cash flow problems. When you send out an invoice, you receive it’s value in cash from the factoring company, minus a fee. Instead of waiting for 30 or even 90 days for payment, you get paid right away. When your customer eventually pays, they pay the invoice factoring company. In the meantime, you regain control of your cash flow and keep your business operating smoothly.

Factoring companies handle billions in invoices every year, and many specialize in a specific industry and tailor their services to serve those clients best. Here are five ways that invoice factoring can help you regain control of your cash flow:

Helping New Businesses That Can't Secure a Bank Loan

Factoring has now been accepted as a viable alternative to a bank loan in many industries across Canada – from trucking to food manufacturing and distribution. Many companies that don't qualify for a loan because they are too new to have established credit, or because they have poor credit are eligible for invoice factoring. That's why invoice factoring is a powerful tool for start-ups and businesses looking to get back on their feet but need an investment in people, inventory, equipment, technology or supplies to do so.

Full Access to Your Account Receivables

Businesses that are just starting out or that have struggled with loan payments can use factoring when they can’t access a loan, but the benefits of invoice factoring are more far-reaching than that. Many businesses that do qualify for loans still use factoring because it gives full access to all of the money in their account receivables now. Access the money you need without worrying about managing loan payments or applying for additional loans down the road.

An Alternative to Bringing in an Investor

Invoice factoring is a great alternative for businesses that are looking for investors. Outside investors may want a portion of your business in return for an infusion of cash. If you need to improve your cash flow, consider invoice factor as an alternative to giving up a stake of your business to an investor. What’s great is that, unlike many investors, invoice factoring will keep up with your sales, no matter how large they get. It’s a wise solution for businesses that are expecting a big ramp-up, or that are worried about managing cash during periods of hyper-growth.

Invest in Your Business

In addition, factoring works well for established companies that issue large invoices that clients take a lot of time to pay. In the 30 to 90 days you are waiting for your customer to pay, you could instead have that cash to reinvest in your business. Self-investment allows you to make better long-term decisions, like buying more materials in bulk, offering the stability to keep your best staff, having the cash to take on more work, and much more.

Reduce Operating Costs

Every business that uses invoice factoring can cut out some of their operating costs. You won’t have to follow-up with invoices, saving you significant time and labour. If you choose non-recourse factoring, (where the factoring company handles clients that don’t pay), then you also will save time and money on collections. Non-recourse factoring has the additional benefit of protecting you from clients who go bankrupt and will never be able to pay the invoice.

Invoice factoring is a powerful tool to help businesses of all kinds get control of their cash flow. Reach out to J D Factors to learn more about how to integrate invoice factoring into your business this year.

 

How to Prepare Your Business for the Second Lockdown

 

As Ontario faces another lockdown on Boxing Day, businesses have a short period of time to prepare for the financial health of their operations and for the wellbeing of employees. While the lockdown is certainly going to be financially taxing on many SME's, the silver lining is that this is not the first time businesses have been through the challenges of either closing completely or operating with restrictions in place. 

If you haven't already, now is the time to lean on your experience over the last year to ensure that you are as prepared as possible for the second lockdown. Here are five tips to help you do just that:

1. Look back at your response to the first lockdown

A successful business is introspective. It's important to look at what went well, and what didn't during the first lockdown and make changes accordingly this time around. Keep in mind that what went well from your perspective may differ from others. Take the time to talk to your employees, partners, suppliers, vendors, and customers to talk about what worked and what you should do differently.

2. Expect and anticipate shipping delays

There have been more shipping delays than usual this time of year because of increased online holiday orders as consumers bunker down and stay home. That may mean that essential business goods or shipments out to customers are taking longer to arrive.

Be patient and remember that essential workers in the shipping and trucking industries are working harder and putting in extra shifts and long days. Despite their efforts many companies are still struggling to keep up with demand and make deliveries on time.

From delivering essential food items to the COVID-19 vaccine, those in the trucking and freight industries are giving up time with their own families and putting themselves at risk. This essential and thankless job is keeping Canadians fed, comfortable and secure and allowing business in Canada to continue. The best way to deal with these delays is to know the reality of the situation and place orders well in advance of when you need them.

3. Identify bottlenecks

Procuring and delivering goods may be one bottleneck to deal with during lockdown, but are there others? Common bottlenecks that can put your business at risk include staffing and cash flow.

Are you ready to cover shifts of employees who may be unable to come to work because they've got symptoms or are waiting for a COVID test result? Have a plan in place and trained staff on standby just in case.

4. Get Your Finances in Order

Many businesses across the country have been relying on government subsidies and programs to continue to operate. That may help you get through the lockdown, but it's not a long-term strategy. For businesses with reduced hours (or those who will be closed), take advantage of the time afforded you and get your finances in order. In an article for the Chartered Professional Accountants of Canada, business consultant Eitan Dehtiar suggests that businesses "look at an overall cost reduction plan, trying to transition as many fixed costs as you can to variable costs so that you have the ability to turn off the tap and adjust."

In addition to reducing costs, advice from EY (formally Ernst & Young) includes evaluating short-term liquidity and closely monitoring cash flow to stay on top of potential shortfalls.

5. Remember, Cash is Always King

Cash flow is always critical to the health of a business, but even when business is good, if customers don't pay what's owed, things can go sideways. Even businesses that have never missed a payment with their bank, like Carl Gatt, owner of BLB Transport Group, may be denied credit when it's needed.

Earlier this month, FreightWaves interviewed Gatt, who shut his trucking business down after a financing dispute with his lender, RBC Bank. Gatt, who is planning on retiring, ended up paying his drivers from his own personal savings after his business accounts were shut down as the dispute went to court.

Luckily for Gatt's drivers, RBC Bank and the courts agreed that he could sell his business to Ready Go, who agreed to buy the company's assets and hire most of Gatt's employees. "When I met Carl, I saw how much he cared about his employees," Ready Go owner and General Manager Ajay Virk told FreightWaves, adding that "we didn't want to see these guys losing their jobs."

While Gatt's story ended on a somewhat happy note, this isn't always the case. Now, more than ever, it's important to get a hold of your cash flow, ensure your accounts receivable are up-to-date, and have a plan should any government programs or subsidies you're using disappear.

Relying on your bank for credit is risky. Instead, consider invoice factoring as a safer way to ensure your expenses are covered. With invoice factoring you'll get paid instantly for your invoices so you can pay your employees and cover expenses. Give the team at J D Factors a call to learn more. Our contactless process means we're able to help your company get control of your cash flow, even during the lockdown.

 

 

 

Negotiating Better Credit Terms

As a small or medium sized business, you deal with credit all of the time. You get credit from your bank and you may offer credit to your customers. In both instances you will benefit financially with better credit terms. Credit from your bank can end up costing a lot. Extending too much credit to your customers can cost you, too. Here are six tips for SMEs to negotiate better credit terms. 

Negotiate with your Bank

Negotiating interest rates and other terms with a bank can be challenging. In fact, many businesses do not attempt to negotiate with banks at all. You may be surprised to learn businesses have a little more wiggle room than consumers when it comes to accepting a bank's terms. Here’s how to better negotiate:

• Understand your situation: You must negotiate with reference to your credit score, your finances, and your projected future. These are the areas that your bank is most interested in.
• Start early: If you’re negotiating terms on an existing credit product, start talking to the bank as soon as possible. On new products, try to negotiate well before you need to use the credit, so you have more time to come to an agreement. 
• Know your options: If you feel like you don’t have any other options, you might agree to terms that aren’t favorable. Understand your bank’s range of credit options and ask about them. Know that you can go to other banks and financial institutions, too. 

Negotiate with your Customers 

When you offer customers an invoice and are delayed payment, you are essentially extending them credit. You may also extend credit to customers with a monthly payment plan for your products or services. In either case, negotiating more favorable terms will result in better cash flow. How do you negotiate successfully, especially if favorable terms mean working against industry standards? Here are some tips:

• Set expectations early: Afraid of losing business by asking for unusual credit terms upfront? Most customers won’t walk and will negotiate when you ask for unusual terms. It’s easier to negotiate when the customer isn’t used to your existing arrangement, so ask for better terms up front. 
• Offer services: There are many services you may be able to offer that cost you nothing, but which matter to your customer. Offer these services in exchange for better credit terms. For example, offer 24/7 customer service, better processing times, or free shipping for invoices paid up front. 
• Offer a discount: If you can afford to, then consider offering a small discount (two percent) for clients who pay their invoices very quickly (within five days). Having invoices paid quickly is an important step to securing better cash flow for your business. 

If your discussions of new credit terms don't generate a lot of interest amongst your customers, then consider using other tools to improve your cash flow. Invoice factoring is one strong option. Your invoices are paid upfront, and the factoring company worries about collecting on those payments from your clients. The result is an improved cash flow and more time to focus on your business. 

Call the team at J D Factors to learn more about the benefits of factoring and for tips and advice when it comes to negotiating better credit.

These Industries Benefit the Most from Factoring

Non-recourse invoice factoring is a powerful tool for many businesses. Those that need better cash flow, more protection from the risk of bad debt, and general flexibility will appreciate the convenience of invoice factoring. However, there is a reason that factoring is more popular in certain industries. 

Some industries present unique challenges to businesses that factoring alleviates, which ultimately makes the business more competitive and stable. Here are four industries that benefit greatly from factoring:

1. Transportation

Trucking is all about time. You need to make your deliveries on time, but customers don’t always pay on time. Even when they do, the industry standard is payment 60 to 90 days after delivery. Afterall, whoever you deliver to needs to use the goods you deliver to run their business and then get money from their clients or customers to pay you, right?

It's this expectation that causes trucking companies to often suffer from a lack of liquidity, which in many cases can prevent them from expanding. Anyone in the trucking industry knows that there are many large, upfront costs to pay for, including staffing, regulations and fuel. Getting cash upfront from your invoice factoring company can help you meet your costs and invest in your expanding business at the same time.

2. Food Manufacturing

Food manufacturers often have large costs and large inventories. You may be worried about new labelling and container regulations, how to meet consumer demands for wellness-focused food, and much more. Selling the value of your invoices through invoice factoring can help you get the supplies you need to fulfill customer orders. In turn this allows you to take on more work, expand when you need to, and make bolder moves in ingredients and packaging. If you’re so inclined, the cash flow strength from invoice factoring can help you innovate, too.

3. Staffing

Digital tools like automation and artificial intelligence are the future of the staffing industry. You’re crunched for time and are tasked with handling large volumes of information while finding just the right talent prior to getting paid. You need capital to invest in the resources to automate, which will help you succeed. With invoice factoring, you get access to invoices upfront, and can use that money to run your business more efficiently.

4. SMEs

While not an industry per se, small and medium sized enterprises do have unique needs that invoice factoring can fulfill. For example, many SMEs cannot qualify for traditional sources of funding, such as loans from a bank. Instead of lending, you can sell the value of your invoicing and get the capital you need to invest in your business and its growth. Non-recourse factoring can also provide you with valuable protection from loss and bad debt, which in some cases can make or break an SME.

Whatever industry you operate within, talk to the team at J D Factors about the challenges you're facing. We work with many businesses within the transportation, food manufacturing and staffing industries as well as owners of SMEs who are looking for a customized financial solution like factoring.

5 Ways Factoring Can Reduce Your Operating Costs

We normally think of factoring as a way to fix cash flow problems. While that's true, factoring can also reduce your operating costs. Simply having consistent cash flow on hand and reducing the overhead you need to manage your accounts receivable can significantly lower your operating costs, making your business that much more efficient and profitable. Here are five ways that you can use factoring to reduce your operating costs: 

1. Outsource or Better Manage Staff

Do you currently use subcontractors to fulfill the larger orders you get? Do you have to lay off staff sometimes when your cash flow dries up? Factoring ensures a consistent cash flow, which allows you to manage your payroll or outsource some tasks to make your business more efficient.

Consistent cash flow may also mean that you can keep more, higher quality staff on hand. Creating a better work environment will enable your employees to give you their best, which can reduce overtime payments and the high one-time costs of hiring and training.

However, it can be even more cost-efficient to outsource specific tasks, including IT, accounting, and marketing, all of which can substantially decrease your operating costs. 

2. Buy Materials in Bulk

For some industries buying in bulk can be a huge savings. Suppliers can afford to give you significant discounts when you buy up more of their product, and this can even lead to a better working relationship with the supplier over time. You become a better customer, who gets more of their time and attention.

Unfortunately, not every business has the cash on-hand to buy in bulk, even when they know they’ll use all the material quickly. Invoice factoring can give you the cash boost you need to make better purchasing decisions, including getting those bulk discounts.

3. Buy Based on Subscription

Working with perishable goods? Those in food manufacturing and similar industries may not be able to buy in bulk because they won’t use all of the supplies in time. In this case, suppliers are more likely to work out discounts based on how consistently you purchase from them. Some suppliers have moved to subscription models; however, you may not be able to take advantage if you have an inconsistent cash flow. Invoice factoring can help. 

4. Accounts Receivable Management

When you use invoice factoring you do not need to manage sent invoices or chase clients to pay you. This can save a ton of time and money. Not having to remind clients about invoices and arrange for payment may mean that you can reduce your accountant or receptionist staff or freeing them up to maximize your business in other ways.

5. Save on Collections Agencies

There are some clients who just won’t pay, so you need to use collections agencies or other expensive measures to get your money from them. One great thing about non-recourse invoice factoring, is that you never have to worry about collecting from a client. If they don’t pay, your factoring company will do the work of taking them to court for you.

At J D Factors our team will work with you to create a plan to reduce your operating costs. Reach out today to learn more about how factoring can help your business.

Business Loans vs. Factoring: Why is Factoring a Good Option?

Many businesses are seeking loans right now to help deal with the challenges of COVID-19 and the quarantine. If you’re looking for financial solutions, a bank may be a great option, but it isn’t your only option. Factoring may be a more flexible and sensical option for your business right now, depending on your specific needs.

 

How is Factoring Different?

While a traditional business loan gives you a set amount of money to be repaid over time at a specific rate, factoring is a much more variable financial tool. With factoring, you send your invoices to your factoring company and not your clients. The factoring company pays you for the invoice right away and worries about getting the money from your client.

At J D Factoring, we offer non-recourse factoring, which has an extra step. Depending on the circumstances, if your client fails to pay your invoice, we don’t ask you to return the money that we already gave you for that invoice. This gives you some risk protection from your clients’ own financial woes. During COVID-19, when many companies will face challenges, this risk protection is absolutely critical.

Less History Required

When you apply for traditional financing options through a bank, you may find yourself turned away because you are too new and do not qualify for financing. That’s understandable from a bank’s perspective, but factoring companies have significantly more flexibility in this regard. We can often take on new businesses that wouldn't otherwise qualify for a traditional bank loan.

More Than Credit

We take much more than credit into account. While credit is a factor for your application, we don’t make our decision primarily based on your credit. This process is especially beneficial for businesses that have begun recovering from a spell of financial hardship, or who have recently faced difficulties.

Banks are Busy

Thanks to restrictions on businesses during COVID-19, many companies have had to reach out to banks for business loans and other financial support. As a result, banks are busier than usual. Plus, most major banks are focusing on their current clients right now, which may mean that you need to wait much longer to even find out if you qualify for a business loan.

That wait can be an even larger problem in these financially uncertain times, especially if your cash flow is strained. You may be missing out on business opportunities, or even on the opportunity to fulfil essential goods and services that people need during COVID-19. In that case, you may want to reach out to the team at J D Factors. We can process your application faster than most banks can right now.

We Help Banks, Too!

That said, J D Factors can also help banks through this challenging time. If you’re facing huge delays, like taking three or more weeks for a process than normally takes one week, consider referring clients that are unlikely to be approved for a loan at your institution to us. This referral will reduce your internal workload, increase customer satisfaction with your institution, plus we pay a commission on clients you refer to us!