5 Ways Factoring Can Fix Your Payroll Woes

For millions of Canadians, the first of the month, mid-month or end of the month is a time of relief. Pay day! A time when bills can be paid, savings accounts topped up, and for the 53% of Canadians who are living paycheck to paycheck, necessary purchases made. 

However, pay day may have the opposite feeling for many business owners, especially those without a healthy cash flow. For businesses struggling to make payroll, it can be a time of stress and a scramble to come up with the cash to pay employees what they’re owed. To do so might mean investing time and resources chasing overdue invoices, transferring funds from one account to another, or even drawing on debt. This moment of panic often takes place quietly, so as not to raise concern with employees, which can add further to the stress and isolation experienced by business owners.

Sound familiar? If so, then it’s time to consider factoring for payroll.

One Simple Process to Remove the Stress Associated with Payroll

Factoring for payroll is a service offered by J D Factors and other factoring companies that’s designed to reduce the common stress and uncertainty associated with payroll.

Here’s how it works: Your business turns over your invoices to the factoring company who will then pay your employees consistently and on time. The factoring company will collect the money owed from your clients when each invoice is due. In this way, factoring for payroll is the ideal solution to solve your cash flow issues and ensure that your employees are paid, no matter when your client’s invoices are due.

The Benefits of Factoring for Payroll

Factoring ensures that your employees are taken care of, stabilizes your cash flow and reduces your stress come pay day, but these aren’t the only benefits. Factoring eliminates the time spent chasing clients for overdue payments, a process which is often uncomfortable and can strain important relationships.

Factoring is also a way to provide your business with the cash it needs to grow and stay competitive, because when you use factoring, you know you have cash on hand when you need it rather than having to wait for payment, or wait for a commercial loan to provide the funding that you may need now. This benefit is especially useful in cases where there’s an opportunity to take on a new client but doing so requires an immediate upfront investment in product, equipment or people.

How Much Does Factoring Cost?

Factoring companies will take a percentage of each invoice as their payment. This amount will depend on factors such as:

• Monthly sales
• Terms of sale (net 30, net 60, etc.)
• Level of concentration (one customer at $100,000 vs 10 customers at $100,000)
• Your customer’s credit profile
• The industry.

At J D Factors, we’ll sit down with you and discuss your goals, challenges and finances to ensure that you choose the type of factoring that’s most beneficial for your situation and industry. We’ll also take the time to explain all the terms and conditions of your contract so that you have the knowledge you need to make an empowered decision that supports the future of your business.

So, what are you waiting for? Eliminate your payroll woes and protect your employees and your business. Give J D Factors a call to explore the benefits of factoring for payroll.

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.

Never Have to Write Off Bad Debt Again

When a client of yours is unable to pay you, you simply have to take the hit. You can write off bad debt, but you can’t recover the strain on cash flow you’ve been suffering, and you can’t get back the time you spent trying to recuperate the debt. In fact, bad debt hurts companies in both B2B and B2C industries more than you might anticipate. 

The Negative Effects of Bad Debt

Typically, you will complete a quote or project for a client well before you realize they won’t be paying you. The result is a reduced cash flow that doesn’t just affect the un-paid project, but also your projects with other, more stable customers.

How does reduced cash flow from a delinquent client negatively impact customers with whom you have a strong relationship? Reduced cash flow means you run the risk of not being able to quickly fulfil customer’s orders and it can prevent you from expanding your business, buying new equipment, or taking advantage of opportunities for growth. Writing off bad debt can cause you to lose a hundred little opportunities.

One bankruptcy can ripple throughout a whole industry. The bankruptcy of Target Canada Co. left more than 1,700 companies with bad debt, ranging from a few thousand dollars to a few million. Any amount of bad debt can threaten a company’s future success, and all of these companies will have to handle this shortfall somehow.

Five Tips to Avoid Bad Debt

It’s best not to let yourself get into this situation in the first place. Here are our best business accounting tips to avoid bad debt:

1. Use Credit Checks

You can avoid a landmine of bad clients by checking their credit. Even if you do want to take on clients with less than stellar records of payment, when you use credit checks you’ll understand what kind of risk you’re taking on. When you work with J D Factors you receive complimentary client credit checks.

2. Send Invoices and Follow-Up Aggressively

Even a few extra days of non-payment can affect your business, so you need to send invoices right away to get the ball rolling. What about following up? Don’t be aggressive in tone, of course, but following up on missed payments is important to keep the pressure on clients and be sure you’re at the top of their payment list.

3. Penalize Late Payments

Think about it, if a client has more than one outstanding invoice, they’ll pay whichever one is costing them the most first. That’s why it’s important to charge interest on outstanding payments.

4. Hire a Collection Agency

How do you chase after bad debts without taking up too much of your staff’s time? It can be more effective to use a collection agency whose staff have the training to get payments faster. Even better, use a factoring service like J D Factors and the invoicing and debt collection becomes our job.

5. Use Non-Recourse Invoice Factoring

Non-recourse factoring protects you from ever having to write off bed debt. The factoring company pays your invoice right away and takes on the risk that your client may not pay if their business goes under. At J D Factors we will not ask for your money back if your client never pays us due to bankruptcy. You significantly reduce your risk, and don’t have to waste time and resources chasing after payments. Give us a call today to learn more about factoring.

How to Manage Your Business’ Hypergrowth

Hypergrowth is both exciting and scary. If you’re experiencing hypergrowth you’re making more sales, more deals and, ideally, more money. However, you’re also experiencing more risk. There’s a possibility to get ahead of yourself and put too much strain on your employees and your cash flow. 

Those who can manage hypergrowth can make the most of this exciting process. If you can’t manage it, you may not experience the increase in revenue you should, and you could even destroy the business. So, how do you take hypergrowth by the horns? Here’s our advice.

Funding Hypergrowth

Adequately funding hypergrowth is critical because managing your cash flow is potentially the most important factor for your business’ success. You suddenly have a ton of new customers. How do you fulfill their orders when your cash flow is limited to your previous size? There are a few solutions:

1. Factoring

The first option is invoice factoring. This is where you hand your new invoices over to a factoring company, which pays you for them immediately. They give you the cash you need to fulfill that order, without having to wait for the customer to pay you. Your cash flow can expand as much as you need it, and only as much as you need it.

2. Loans

Loans are another option. You can get a traditional bank loan, but this is typically inflexible and very time consuming. Are you asking for too much? Then you may have trouble paying the loan back without cutting into profit. Are you asking for too little? Then you may not be able to take full advantage of your hypergrowth.

3. Investors

Start-ups that are experiencing hypergrowth typically look for investors. It’s great if you can find an investor who will back your orders. However, it’s rare. Invoice factoring is a more reliable funding source that can help you mitigate the risk of hypergrowth.

Guiding Your Culture

Other challenges you may face during hypergrowth come from your staff and business culture. One common problem for established companies experiencing B2B or B2C hypergrowth is that the staff are reluctant to change. It may take a lot of work to get staff up to date with new procedures, but also to change their mindset. When possible, replacing key staff, especially those who are responsible for the teams that need to change the most, is a good idea.

Hire Carefully

You may be onboarding new staff not just to replace current staff, but to grow. One big mistake you may make is getting ahead of yourself too quickly. You can’t be sure how long hypergrowth will last, or where you’ll be when it’s over. So, don’t hire based on some future projected size.

If you hire a former CTO of a massive company, but you’re currently 100 people strong, their skills may not translate well to your environment. You’re hobbling yourself, not fulfilling a future need. 
Instead, hire flexible, motivated people who have experience with the current size your business is at. Always keep in mind their ability to grow, as your business grows.

Choose J D Factors 

J D Factors can help you fund hypergrowth and expand your cash flow as you need it, without getting ahead of yourself. Reach out to us today to learn more.

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.