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.

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.

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.

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.