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.

 

Cash Flow Mistakes SMEs Should Avoid & 4 Easy Solutions

You need to buy supplies, pay staff, and make investments. But suddenly you don’t have enough cash on hand for these necessities. Cash flow sputters like this can significantly impact your business, so much so that you miss out on contracts, are late to deliver, drive away your best staff and struggle with other problems. For many small and medium sized enterprises (SMEs), most cash flow issues are the result of a handful of common mistakes that are easy to correct. Here are four things your SME should do to avoid common cash flow problems.

1. Conduct Regular Cash Flow Projections

If you know that a cash flow problem is coming, you can change your decisions to get your business on the right track. The key to seeing problems coming is to conduct cash flow projections. Many different accounting programs include options to project your cash flow. You can also project it yourself with basic expenses and accounts receivables information.

2. Finance Major Purchases

If you need to invest in new equipment, property, or other major purchases, don’t dry up your cash reserves to do it. You need the flexibility of having cash on hand. Look into financing options for all of your major investments. It may cost a bit more, but it also enables your business to be more financially flexible and take advantage of opportunities.

3. Regularly Check Your Profitability

If your business isn’t profitable, then you will inevitably struggle with cash flow. Even if you were very profitable the last time that you looked, it's important to review your finances regularly because things can quickly change. Check how profitable you are and look for ways to boost your profitability. You may need to charge more for certain services or products, focus more on selling what’s most profitable to you, or reduce your expenses. Regularly checking your profitability is a wise idea to streamline your business and prevent major problems before they pop up.

4. Keeping Good Invoicing Practices

When you get paid will dramatically affect your cash flow. In order to get paid as quickly as possible, you have to have strong invoicing practices. That means making payment terms clear to customers from the outset, sending out invoices as soon as you can, demanding payment in 30 days or less, following up on invoices that are late, and using strong collections tactics. If you work with fewer, larger clients and can afford to be selective, it is wise to take on only the clients who pay well. Also, you can consider offering stricter terms (such as higher late fees) for clients who routinely pay late.

What If You Are Still Having Cash Flow Problems?

Some businesses have to wait a long time for payment, manage large projects, and deal with other inherent problems that make managing cash flow more problematic. Factoring can help you manage your cash flow better so you can build a more robust business. You’ll get your money within 24 hours of issuing your invoice and be able to use it immediately. This can also benefit you by reducing the time and resources you spend on invoicing and collecting. Contact J D Factors for more information on how invoicing can help your SME regain control of your cash flow.

Last Minute Tax Tips

It’s tax season again, which means it’s time to get your affairs in order. This can be a busy and stressful time for everyone, but particularly for small and medium sized businesses. Add the unique stressors of the pandemic, and your taxes may seem even more daunting this year. But have no fear, there are a handful of simple, last minute tax tips that will help alleviate the stress.

1) Start Early

Don’t procrastinate. This can be hard when things are stressful, but you will be better off if you just buckle down and get things done. So, call your accountant to make an appointment to start early to ensure that you are ahead of the game and avoid any surprises.

2)     Pay on Time

Missed payments, late filing and other delays can lead to unnecessary fees or interest payments, ultimately making your tax season more expensive than it needs to be. Worried you won't have the cash on hand to pay your taxes? The team at J D Factors can help. We can work with a pre arranged payment plan with the CRA and can even put aside a portion of funds from funding to go towards your tax bill.

3)     Ask for Help

The Canadian government offers several credits and deductions for small-to-medium sized businesses to assist with pandemic recovery. These programs are designed to help you save money to support the growth of your business and the Canadian economy. Make yourself aware of these assistance programs and their tax implications. Doing so could help save you money and accrue additional support for your business.

4)     Be Thorough

The last thing you want is to be finished with your taxes and then get a letter from the government saying your business must undergo a costly and time-draining audit. While sometimes being audited is random and unavoidable, you can take steps to prevent the likelihood. Your accountant and bookkeeper will help ensure that you:

• Are thorough with your deductions.
•  Understand the limits to deductions such as travel expenses and dining out and don’t overestimate them.
• Keep consistent and detailed records of what you claimed on your taxes (this is important to keep for your own purposes in case an audit is in your future).

 5)     Seek Help from a Professional

At J D Factors, we provide factoring advice to small and medium sized businesses looking to improve cash flow (and following these tax tips will help you do just that). Contact us to get your cash flow under control so you can pay your taxes on time.

Remember, there's still time to seek help from a professional accountant, and we'd be happy to connect you with some of the best – reach out if you need a referral. Working with an expert will ensure that your taxes are done properly, thoroughly and on time.

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.

 

 

 

How Factoring Can Help Save Your Business from Financial Uncertainty

Managing cash flow always has its challenges, but during a pandemic it can be even more difficult. For most B2B businesses, instability creates unpredictable customer behaviour. Cancelled orders, delayed payments, and bankruptcies will all undermine your cashflow, and potentially even threaten your own business. Some small businesses are finding themselves negotiating with their larger customers who use Covid-19 as a reason to try to change payment terms.

If your cash flow has been a source of worry for the last few quarters, or you’re worried about the impact of even more lockdowns on your customers and their ability to pay, you should consider invoice factoring. Invoice factoring can help save your business from financial uncertainty, here’s how.

Cash in Your Hands

When you work with an invoice factoring company, you send your invoice out to the company. The factoring company pays you an agreed upon percentage of what you are owed, and then passes the invoice onto your customer. If you work with J D Factors, you’ll have payment for your invoice within 24 hours. That means that no matter how long it takes for your customers to pay, you’ll have the cash you need to:

• Buy more materials and inventory
• Pay your staff
• Pay your rent
• Invest in opportunities and innovative practices.

A strong cash flow is critical to keep running your business, which is critical during this financially difficult time.

Let Us Handle Collections

What happens when you have many more late payments than usual? Usually, you have to divert more of your resources, like money and staff time, to remind customers to pay. Stop chasing clients down! When you work with an invoice factoring company, you don’t need to waste your resources or threaten your relationships with your overdue clients. Leave all that headache to us. We will remind your customer to pay and if necessary, deal with collections, which can be an expensive process for you (and less so for us, because we have partnerships with outstanding collections agencies.)

Another benefit of having us handle the collections is that you won’t need to speak to your customers during the collection process, and they won't have the opportunity to bring up payment term changes with you.

Non-Recourse Factoring

Bankruptcy of your clients is a large risk in 2020, and likely will be moving into 2021. Forbes argues that more retailers are likely to go bankrupt in 2021, and other industries may be at risk too, especially as the Canadian government drops some of the protections it has offered businesses.

Bankrupt businesses do not have to bring your company down with them. J D Factors offers non-recourse factoring. That means if you have a customer who does not pay because they go bankrupt, we do not ask for the money we paid you for the invoice. You don’t have to return the funds, which means you can confidently use the money to run your business when you first receive it, even if you suspect that your client is in trouble. And, you don’t have to worry about absorbing the bad debt from a client’s bankruptcy, we will do that for you.

Non-recourse invoice factoring from J D Factors can help save your business during these financially difficult times. Reach out to us today to discuss how we can support you.

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!

Factoring and Taxes - What SMEs Need to Know

For small or mid-size business owners, tax season can be nothing short of a headache. On top of ensuring that business continues as usual through invoicing, payroll and other current daily operating expenses, there is the added stress of making sure that all of the previous year’s budgets, expenses and revenues are aligned and accounted for, and that everything is properly deducted and filed on time. There is also the risk of penalties – more money lost – if there are delays, which can be an even greater problem for small business owners.

To help ease the strain, here are some key tax tips for 2020 that every SME should keep in mind.

4 Tax Tips for 2020

Proper Bookkeeping

If 2019 wasn’t the best year for organizing and staying on top of company documentation, 2020 is the time to start. While many SMEs can afford a bookkeeper, those who can’t and must keep track of everything on their own should be even more mindful about proper documentation. This includes having receipts and other records properly sorted in physical folders with digital copies where possible - a good practice to carry forward as more processes are being conducted online regardless. Additionally, in the event that something happens to those print documents, keeping a separate backup can be critical come tax time.

Consulting a Professional Accountant

For small business owners especially, the guidance of an accountant or CPA is useful in sorting through and organizing documentation, expenses, tax credits and even potential deductions that may have been missed. This also includes advice on what the CRA will be looking for in the case of an audit and ensuring that all of the common expenses, such as vehicle, entertainment and meal expenses, are accurately accounted for. In some situations, tax preparation and accounting fees can also be considered tax-deductible.

Requesting an Extension

If time is an issue, filing a request for a tax extension can be a helpful step to avoid missing deadlines which can be even more costly in the long run. In the event that a deadline passes and a business must pay up on penalties, accounts receivable factoring can also be a key solution.

Factoring for SMEs

With invoice factoring and accounts receivable factoring, SMEs can get the money they need to balance outstanding invoices and cover tax costs to the CRA without putting a strain on daily cash flow. At J D Factors, we pay your invoices upfront, minus a nominal discount, then handle the risk, time and energy involved in collecting payment. This service allows SMEs to continue business operations without the worry of unstable cash flow or missed payments from clients.  

Contact J D Factors to learn more about protecting your business during tax season and get more tips for invoice factoring and accounts receivable financing.

Financial Solutions to Manage Your Cash Flow Better in 2020

Was 2019 a difficult year for keeping on top of your business bills and costs? As you reflect on last year’s business performance, you may feel that you need to plan for new cash flow solutions. Poor cash flow can cost you opportunities, customers, and even other business relationships such as sub-contractors. Commit to better cash flow in 2020 with these financial solutions.

Fine Tune Your Process

Having more cash on hand may be a simple matter of finding that cash in your process. Whether you are providing a service or creating a product (or both), you should review your process yearly. Are there cost savings to be found in streamlining your production, changing your services, or even your pricing structure? For example, subscription-based pricing gives businesses more consistent payments and therefore makes managing your cash flow simpler.

Change Your Vendor Relationship

It’s a wise idea to review your current vendor relationships and make sure you’re still working with vendors that make the most sense for your business. It’s not always wise to choose the cheapest, but you need to regularly review what else is out there in case there are more affordable options that may work out better in the end.

Once you’re sure you want to move forward with your vendors for 2020, you may consider putting some new effort into the vendor relationship. Do they have knowledge you can take advantage of, or ideas about how your business can become more efficient? Both can help you manage your cash flow better.

Reward Regular, Timely Payments

Once you’ve reflected on your vendors, reflect on your customers as well. It’s easier to manage your cash flow when you have customers who pay on time. You can encourage them to do so by rewarding timely payments with thank you notes, coupons and discounts.

You can also discourage late payments by changing your payment policies. The following can help:

• Send invoices immediately
• Follow-up on invoices before they are due
• Charge more interest on late payments
• Have customers who pay late make deposits upfront
  

Try Invoice Factoring 

Unfortunately, managing your customer’s payments and trying to discourage late payments can be costly, and so can trying to recover payments from clients who have outright refused to pay. This can quickly eat into your cash flow. A better solution is invoice factoring.

In order to start invoice factoring, you need to partner with a factoring company. Instead of sending your clients your invoice, you send them to the factoring company, who pays you the invoice amount immediately. Then, the factoring company sends the invoice to your client and does the hard work of getting a payment. This is very beneficial for managing cash flow as you get paid immediately, minus the factoring company’s fee.

Another type of accounts receivable factoring, called non-recourse factoring, may be an even better option for you. If your customer never pays the invoice, the factoring company does not ask for the initial amount they paid you. They take the loss, not you.

Reach out to J D Factors today to get a quote for invoice factoring and start 2020 off with better cash flow management.

Four Tips to Get Yourself Out of Your Cash Flow Crisis

Cash flow problems can make the day-to-day operations of your business much more difficult. When you lack the money to pay suppliers, contractors, or fund your other operating costs, you miss out on critical opportunities. However, if you can make it through a cash flow crisis, the rewards can be great, including higher growth, and a leaner, more stable business. Here are some ways to get out of your cash flow crisis with a business that’s stronger than ever. 

1. Increase Prices

When you don’t have enough cash on hand due to huge demand from customers or the failure of some clients to pay promptly, increasing prices can quickly get you back in the black. This strategy is more immediately effective when you have shorter payment terms (one to 30 days). If your clients pay immediately, you could be bouncing back within the month.

However, you should increase prices carefully as there could be a negative impact of doing so, including slowing growth or losing more reliable customers that pay on time. If you’re concerned, you can selectively raise your prices for clients who don’t pay. Or, selectively raise your prices on select services. Ultimately, there’s a lot of thought that goes into pricing. Consider brushing up on pricing optimization before adjusting your prices.

2. Cut Costs

Cutting costs is a straightforward way to make the most of the money you do have in the bank. Take stock of all of your costs and find out if they are truly necessary for your business as it stands now. Many older businesses become encumbered with superfluous expentidures, such as software they don’t really use, staff positions they don’t really need to fill, or advertisement methods that aren’t providing a strong return on investment. Though this process can be challenging, it is very healthy for a business over the long term.

3. Revise Your Billing Practices

Increasing prices and cutting costs are rather large-scale changes to your business. You can pull yourself out of a cash flow crisis without by changing your billing practices. This is a slower method, but it can help. 

Consider the following changes to your invoices:

• Send complete and correct invoices right after the job is complete
• Change billing terms to immediate payment, or not more than 30 days
• Increase the interest you charge on late payments
• Follow-up weekly on missed or late payments
• Hire a collections agency or a lawyer to reach out to late clients
• Request up-front payment from clients who have paid late before.

4. Choose Invoice Factoring

Luckily, there is a way to quickly get yourself out of a cash flow crisis that doesn’t require large structural changes to your business. It also doesn’t require you to invest your time or money in new billing practices or methods of following up on bad debt. Invoice factoring is a simple solution that makes your business more stable.

You send your invoice to a factoring company like J D Factors, and we pay you immediately. We take on the work of forwarding the invoice to your client and following up on late or missed payments. Meanwhile, you already have the cash in your pocket, and you don’t need to dedicate resources to debt collection.

J D Factors also offers non-recourse factoring, which means that if your client goes bankrupt and can’t pay, we’ll protect your cash flow by taking the loss. Reach out to us today to learn more about our non-recourse invoice factoring services.

Bankruptcies are on the Rise: What Does it Mean for Your Credit?

In 2019, Canadians have seen an increased bankruptcy rate. More Canadians are facing insolvency than ever. Roughly 15 percent of income earned by Canadians goes towards debt payment. According to Loans Canada, the reasons for this high level of bankruptcy may include high cost of living, social pressure for spending, and missing payments. If you’re considering bankruptcy you may want to first know how it affects your credit, and what other options are available to you. 

How Bankruptcy Impacts Your Credit

Bankruptcy does significantly lower your credit score. As a result, you may be unable to get a car loan, mortgage, or business loan while the record of your bankruptcy impacts your credit rating.

How long will that be? A bankruptcy remains on your credit report for six years from the date of your discharge. It takes about nine months to get to the discharge phase, so the total is almost seven years. If this is your second bankruptcy it will remain on your credit report for 14 years.

This doesn’t mean you can’t get any credit products during this time. In fact, it is important to get a starter credit card and develop good habits with it. Doing so can help you rebuild your credit. Anyone who has declared bankruptcy should seek professional help about how best to rebuild their credit, so they can avoid a second bankruptcy.

Businesses can also declare bankruptcy. If you’re a sole proprietor this process is no different than filing for personal bankruptcy. If you own an incorporated business, it can go bankrupt without impacting your personal credit. However, you may need to sell the assets of the business in the insolvency process.

Pre-Bankruptcy Options for Businesses

As it has long-term effects on your credit and other costs, it’s best to avoid bankruptcy whenever possible. Depending on your businesses’ situation, one of these options may help you recover financially instead:

Debt counselling can help your business develop a plan to recover from your debt before you’re forced to declare bankruptcy. Professional guidance can show you how you need to change your specific financial habits to get your debt under control.

That professional may also suggest a debt consolidation loan. This kind of loan combines all your debt sources into one, even dropping the interest rate down on some of the debts. Paying only a single payment and collecting less interest will help you recover from the debt.

Sometimes your situation warrants a Business Proposal instead. This is an offer you develop with a licensed insolvency trustee that helps you recover financially, often focusing on consolidating your debt and lowering the interest rate.

If you’re a business owner, you have other tools that can help you get back on track. Invoice factoring is one option. It gives you a healthier cash flow, so that you can make debt payments more regularly. 

As an owner of an incorporated business you may be able to combine factoring with other pre-bankruptcy options. Call J D Factors today to find out of invoice factoring is an option for your business.

Should You Re-Evaluate Your Credit Criteria for Selling on Credit Items?

If you currently sell credit items to your customers, chances are you should take a second look at your credit criteria. Over time, you may find you’re overextending yourself or reducing your cash flow by offering too much credit. Or, you could be losing business because you’re not lending enough. 

Why Offer Credit in the First Place?

People may be thrilled to find a business in your industry which offers credit. Not only can you attract new customers when you offer them credit, you encourage your existing customers to make larger purchases. They can afford the purchases with less struggle through payment plans and ultimately, you’ll make more money.

When you offer credit you also make it clear to your clients that your business is financially stable and a worthy long-term partner.

If you’re considering offering credit for the first time, then it’s a good idea to test this new service out on a selection of new and existing customers first. This test can help you gauge if the risk of offering credit is worth the increased sales you’ll see. Or, you may find that offering credit to only your top customers is the best way to minimize your risk.

We Recommend Being Strict About Your Credit Criteria

Occasionally, you may also find that customers using your credit services or products may begin to miss payments for the first time. Perhaps they have over extended themselves. If these missed payments are significant to you, it’s a good idea to tighten up your credit policy so that your other clients won’t start missing payments and add even more stress to your business.

If you’re having cash flow problems, consider changing your credit policies. You need to generate enough cash flow to keep your business operating even when you’re lending out maximum credit to your clients. It’s also wise to account for a certain percentage of missed or late payments. That percentage depends on your business and your current clientele.

Be Selective About Your Credit Policies

Remember that you can offer different clients different credit terms. Their history with you is one of the best indicators of their credit worthiness.

If one customer has an excellent payment history with you, extend them a bit more credit. Offer less credit to new customers and those with poor histories. This can help you make up for the risk of their credit, so you don’t have to restrict your credit criteria across the board.

Want to Limit Your Credit Risk?

There are more ways to limit your credit risk than just changing your lending policies. J D Factors can take on the risk for you. We pay your invoices as soon as you submit them and get payments from your customer. We also offer non-recourse factoring, which means that if your customer never pays because of a credit issue such as bankruptcy, we don’t ask you for the money back. We offer protection from bad debt and much more.

Factoring gives you a healthier cash flow, so you have the cash on hand to take advantage of supplier quick pay discounts, can pay down your debt, purchase new equipment, and invest where your business needs it.

Still not sure? Contact J D Factors today for free credit checks on new or potential customers, free of charge with no strings attached.

Bankers Use J D Factors as a Short Term Solution for High Risk Clients

As a financial institution, are you serving your small and medium sized business customers as well as you can? How many potential customers are you turning away because they don’t qualify for financing? The solution isn’t to lower your standards, but to help businesses qualify for your services. You need a short-term solution that can get your potential business customers on the right path.

Factoring may be part of that solution. Factoring can give your clients the healthy cash flow they need to improve their credit, pay down their debt, and eventually qualify for your financing or other products. Everyone benefits: your small and medium business clients get the financial support they need, and you gain a new client who is grateful for the past assistance you provided.

How Factoring Helps Your Clients

Do you find you have clients that you’d love to help, but their credit score, debt, or other aspect of their business disqualifies them? You can still help these clients by pointing them to another option: accounts receivable financing, or factoring.

With factoring, your clients will receive the money they invoice for immediately. This can help them build a positive, healthy cash flow they need to make the investments required to support hypergrowth or otherwise improve their business.

J D Factors goes a step further and offers non-recourse factoring. This means that we take on the risk of bad debt and don’t demand money back from our clients, even if their customers never pay. So, if you have a potential client whose financial troubles are partly due to their unreliable customers, non-recourse factoring can help them eliminate that risk and start to recover.

How Suggesting Factoring Helps You

As a bank or financial institution, your loans will always be in demand. It’s just a question of whether those who want your financing are eligible for it. Factoring is the perfect way for you to help new clients qualify for your services.

Factoring doesn’t have to compete with bank loans. Chances are, the clients you send J D Factors will continue to use factoring until they are ready and qualify for traditional financing with your organization.

You should also recommend factoring to your clients because when you show your potential clients that they have other options, they trust you. You demonstrate that you care about their business, even if you can’t help them right now. That makes them much more likely to return to you when their business is in a position to take on a loan.

Further, when you send clients to J D Factors, we can give you a referral payment. If the customer you send us doesn’t work with you again, you’ll have earned something for your time helping them.

Contact J D Factors to learn more about how we can partner together, to strengthen small and medium sized businesses across Canada.   

4 Invoice Factoring Mistakes to Avoid at All Costs

Invoice factoring can be a useful tool to keep your cash flow healthy and your business growing. It’s often your best alternative to a bank loan or line of credit. However, invoice factoring isn’t something you want to jump into without fully examining how it will work for your business. Here are four invoice factoring mistakes you should avoid at all costs.

Mistake #1: Choosing Recourse Factoring When You Want Non-Recourse Factoring

Have you decided that factoring is best for you because you’re finding it challenging to collect from clients who are chronically late? Or, have you grown so fast that money is out the door before you get paid for previously completed projects? There is always a risk that some of your clients cannot pay, whether because of poor cash flow of their own or even bankruptcy. If so, who is responsible for the bad debt?

In recourse factoring, you’re responsible for bad debt regardless of the reason for nonpayment and you have to pay your factoring company back for the full invoice amount and any fees your customer refuses or can’t pay.

However, if you chose non-recourse factoring, the factoring company takes the hit if the reason for nonpayment is a credit issue, such as bankruptcy or if they’ve closed their doors, moved away, or have poor cash flow themselves.

Generally speaking, recourse factoring is best for companies who know and trust their customers, while non-recourse factoring is best for those who are new to the business and are looking to grow. However, choosing the right type of factoring for your business is not quite so cut and dry.

There are several myths out there about recourse versus non-recourse factoring which cause confusion, and it’s important to understand the differences between recourse and non-recourse factoring before making a decision about what’s best for you.

Some people think that with non-recourse factoring you’ll get lower advance rates or that it’s harder to qualify which is simply not true. Also, some people dismiss non-recourse factoring thinking that it’s unaffordable. While non-recourse factoring can be slightly more expensive because you’re paying for the additional protection, at
J D Factors we offer very competitive rates for non-recourse factoring.

Considering these facts, for most businesses, especially B2B companies, it makes sense to mitigate your risk of bad debt with non-recourse factoring, which provides peace of mind that you will be paid and able to pay your own obligations.

Mistake #2: Making a Price-Based Decision

A common mistake people make is choosing a factoring company based on price alone. It’s important that the factoring company knows and has experience in your industry. As well, ensure that they understand your needs, are flexible and have a simple termination policy. As you can see, when it comes to choosing a factoring company there’s a lot more to consider than price alone.

Mistake #3: Misunderstanding the Fees of Your Factoring Agreement

Factoring companies make money by taking an agreed upon percentage of each of your invoices. There may also be charges for other services you ask for. It’s important to understand how much these fees are. J D Factors stands alone with fully transparent pricing, with no hidden fees.

A factoring company may, for example, charge their fee on each invoice you send them, by only advancing a certain percentage of the invoice It’s best to understand the fees and schedules before you sign up.

Mistake 4: Accepting Payments from Clients Instead of Re-Directing

It’s important to ensure that your transfer to factoring is complete. You don’t want to be receiving money from your factoring company and your client, as you’ll end up paying much more or even losing your reserve amount. Instead send your customer’s payments to your factoring company immediately.

Or, partner with a factoring company like J D Factors that does all of the legwork for you and direct your customers right to them for payment. It is important for the lines of communication to always be open between you, your customer, and your factoring company. It may take a bit of time for your customers to adjust to this, but once they do it will be smooth sailing.

J D Factors is dedicated to helping you avoid the common pitfalls of switching over to factoring. We have experience guiding companies and their clients with our exceptional customer service and custom solutions. Reach out to us today to learn more.

Non-Recourse Factoring

You’ve likely dealt with frustrating clients before. Sometimes a debtor will simply avoid you until they declare bankruptcy. Some are just chronically late or irresponsible and dealing with them can be just as tough.

Sometimes, it takes a lot of work to get clients to hand over the money you’ve earned. There are plenty of techniques to chase clients down, including contacting them regularly, using an escalating tone, claiming interest, and even bringing the client to court. Not only will these steps sour your relationship, but they cost time and money you don’t have.

With factoring, you receive your payment from a factoring company, who issues your invoices and collects payment on your behalf. Factoring is a huge benefit to your business, but non-recourse factoring is even better. That’s because non-recourse factoring removes the credit risk of unpaid invoices.

With traditional factoring, if a client or customer refuses to pay, the factoring company usually expects you to buy the accounts back, at their original cost. To do this, they often withhold some of the value of your future invoices (which defeats the main benefit of invoice factoring—it’s predictability). While it’s helpful that you save some of the costs of dealing with your unpaid invoices, this kind of accounts receivable financing leaves the biggest risk in your hands.

Non-Recourse is The Smarter Choice

Non-recourse factoring is different. At J D Factors, we pay you within 24-hours after you issue an invoice and we take on all the risk and costs of dealing with your clients. If they never pay, that’s our loss. Period. That’s why non-recourse factoring is a great risk management option for your business.

At J D Factors, we’re experts at collecting on accounts receivables. We have the experience and techniques to minimize the risk from the accounts we take from you. We’re good at what we do, so you can spend your time doing what your business is all about—delivering your products or services.

An Investment in Your Time

Rather than worrying about unpaid invoices or cash flow, with non-recourse factoring you simply pay a factoring fee to save yourself the time and money you’d be spending chasing after clients. When you offload your unpaid invoices to J D Factors you won’t have the worry of a credit risk associated with some clients. Non-recourse factor allows you to establish worry-free relationships with new clients. If they turn out to be bad risks, the risk is ours. You’ll still get paid.

Contact J D Factors to start non-recourse factoring and truly free yourself from the drain of unpaid invoices.

Sources:

http://blog.factorfunding.com/blog/what-are-the-differences-between-recourse-and-non-recourse-factoring/

http://www.rtsfinancial.com/guides/difference-between-recourse-and-non-recourse-factoring