Tips for Spring Cleaning Your Business' Finances

In light of COVID-19, your business may be feeling the financial stress experienced by most Canadians. Are your business' finances robust enough to hold you over until the quarantine is over? Whatever state your finances are in, now is a good time to do some financial spring cleaning. Revisit your business goals, plans and expenses to make your business more robust for this and future challenges. 

Revisit Your Long-Term Goals

Now that your short-term business has changed so dramatically, you may need to change your long-term goals. If you don't have any written down, now is a great time to start keeping a written record of the things you want to accomplish, whether it's a sales goal, creating a new website, or launching a new product.

Unfortunately, because of COVID-19, many of the long-term goals you've had for the year may need to be pushed back. And, because of the current uncertainty about when things will return to normal, you may have to leave your long-term goals on the backburner.

However, you can still learn a lot about what your next steps should be by re-prioritizing your goals and identifying those that you can accomplish in the short-term. Maybe a new product launch isn't your next best step. Perhaps reaching an online audience or starting to ship your goods is now your top priority.

Better Business Management

Have you invested in new digital tools to help you manage your business? These solutions aren't just limited to finances. Cloud-based tools may be as helpful for communicating with clients as they are for invoicing or communicating with your employees.

These solutions do not have to be expensive, either. There are now many free or open-source versions of some popular business management tools. Although, depending on your current finances, now might be a great time to check out paid options too. You have the time to really get to know new software and discover if it will fit your needs moving forward.

Consider Cash Flow

Many businesses are having cash flow problems now as their sources of revenue pause or dry up. If you were already having cash flow problems before the crisis began, you may have had even less time to prepare your business to survive than you would have otherwise.

You can better manage your cash flow moving forward with factoring, a type of financing where you are paid up-front for the invoices you create, even though you have not yet been paid by your client. This arrangement gives you the capital to buy materials, tools, pay employees, and handle your other business expenses.

The team at J D Factors specializes in non-recourse factoring and remains open for business for new and existing clients. We know that the current situation has put a lot of financial stress on companies, which is why our team remains open for business and ready to help you.  Our advanced automated systems will allow you access to quick cash in under 24-hours. Simply send us your invoices and any backup documentation such as time sheets, delivery slips, etc. by email and we will fund you with a direct deposit into your bank account.

Our non-recourse factoring program will allow you to continue to work for and bill your customers with peace of mind knowing you will not have any bad debt. This is a great way to minimize your risk in times of uncertainty. Give us a call today to learn more about how we can help your business survive the financial uncertainty caused by COVID-19.

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.

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.

The True Cost of Your Receivables – What You Stand to Lose with Outstanding AR

Outstanding accounts receivable costs your business more than you think—and chances are you’re already frustrated with your business’ cash flow. Measure your costs with days sales outstanding (DSO), consider borrowing costs, and discover how to lower the costs of your outstanding accounts receivable.

Consider Borrowing Costs

To improve cash flow, many companies borrow against their account receivables. The largest companies often get a reasonable interest rate, but the smaller your company is, the more likely it is that you’ll get an unwieldy interest rate —just to access money you’ve already earned.

Tip: Reduce your borrowing costs by getting your accounts receivable filled faster and reducing your DSO.

Measure Your Days Sales Outstanding

There are a few ways to measure your account receivables, but DSO is one of the most valuable methods. It measures how many days it takes from delivering your product or service until the cash from that payment is in your hands.

Most companies add 30 days to their DSO right off the bat by having net 30 payment terms, and net 60 is quite common as well. But when a customer pays a few days past that, let’s say 14, your DSO is 74. That’s 74 days of missed opportunities.

You can cut your average DSO outright if you can reduce your payment terms, but this can be frustrating for clients. Otherwise, you’re essentially at the mercy of your clients and when they choose to pay.

While you wait, you collect borrowing costs and you lose out on business opportunities you may have pursued if you had a better cash flow. Even if you collect interest on outstanding payments you won’t outstrip your overall borrowing costs.

If you are growing, you’ll find you have a higher average DSO, as new clients drain your cash without immediately paying you. This creates a real problem if you want to keep growing. And, of course, you do want to keep growing.

You’re Losing Time and Money

Collecting your outstanding accounts receivable (AR) faster is possible, but it costs both time and money. Hiring experienced collections staff and giving them the resources to pursue your clients is a large drain on your time and resources. There are staff and collections strategies that can get your clients payments faster, but at what cost? There is a better alternative.

Accounts Receivable Financing

There’s another way to reduce the cost of your outstanding AR. Invoice factoring through J D Factors will reduce your DSO to one! You send your invoice to us, not to your client, and we pay you the balance within 24 hours.

From there, we invoice your client on your behalf and take on the costs of collecting. In fact, J D Factors offers non-recourse factoring, which means we also take on the risk of non-payment. In a single day you’ll have the resources you need to keep investing in your business. Stop worrying about borrowing costs and sinking time and money into collecting on your outstanding accounts receivables. Contact J D Factors today to start the approval process.

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