Use Factoring to Get Control of Your Cash Flow in 2021

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

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

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

Helping New Businesses That Can't Secure a Bank Loan

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

Full Access to Your Account Receivables

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

An Alternative to Bringing in an Investor

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

Invest in Your Business

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

Reduce Operating Costs

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

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

 

How to Prepare Your Business for the Second Lockdown

 

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

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

1. Look back at your response to the first lockdown

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

2. Expect and anticipate shipping delays

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

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

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

3. Identify bottlenecks

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

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

4. Get Your Finances in Order

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

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

5. Remember, Cash is Always King

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

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

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

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

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

 

 

 

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.

Invoicing Do’s and Don'ts - Advice from the Experts

You've done the work, now it's time to get paid! Are your invoices encouraging your clients to pay quickly and on time? Your invoice is part of your customer's experience with your business and doing it well will encourage them to pay you faster. 

It's important to be paid quickly – a good payment turnaround can benefit your business because strong cash flow lets you pay your bills, capitalize on opportunities, and remain stable. It all starts with invoicing. Here are our invoicing tips and guide on how to get paid quickly.

Include a Due Date

You shouldn’t think of your invoice due date as optional. Clients absolutely need a reminder of when the invoice is due whenever they look at it, or there’s no real motivation to go and pay it. You should also think carefully about the terms of your invoice. If your industry standard is 60 or even 90 days, you may want to buck the trend with something more reasonable, such as 30 or 15 days. These terms help you get paid faster and help you get on missing payments faster, too.

Also, keep your due dates consistent so your clients understand when they should pay.

Create a Self-Service Portal

Mailing or hand delivering invoices is outdated, and even emailing them creates the opportunity for them to get buried or land in someone's spam box. Try a self-service portal instead that offers payment methods to customers. Deliver the invoice through the portal, so that your customer is immediately able to pay the moment that they get the invoice.

Choose a portal with lots of payment options, or you will discourage your customers from using it.

Direct Your Invoice Properly

Sometimes your point of contact in the company is not the best person to send the invoice to. When you start working with a client, ask them who should receive the invoice. Often, you’ll have a dedicated contact in accounting who should get all of your invoices. This can save you time, as you won’t be relying on your contact to send your invoice to the right person. That extra step can actually add a lot of time if your contact is busy.

Offer Early Pay Discounts

If it is affordable for your business, offering a small discount for early payment can really help you get paid faster. Try offering a two percent discount for payment before the 15-day mark, or even earlier. Customers who want to take advantage of this discount will often pay the moment they get their invoice. That can save you a tremendous amount of time and work in collecting the invoice.

Don’t offer too much of a discount, or a discount for common pay terms like 30, 60, or 90 days. Those who pay exactly on-time should be motivated by late fees. Use a discount only to encourage the fastest turnaround possible, or you may simply be losing money without getting enough benefit.

Are you still struggling to get paid quickly, even when using these best practices? You can get paid even faster and have a healthier cash flow with invoice factoring! At J D Factors, we pay you as soon as you send your invoice, which can have huge benefits to your business. Reach out to learn more about factoring today.

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.

Financial Solutions for SMEs

Small and medium sized enterprises (SMEs) don’t have access to the kinds of bulk financial solutions that large enterprises can use. Instead, small businesses need more focused tools that can sub in for what might be an essential in-house function in a large corporation. Otherwise, you spend too much money on functionality designed to streamline efficiency that you often don't need. Here are five ways to save money and carry out business as if you had many more employees than you do.

1. Staffing Instead of Human Resources

Hiring employees can be a huge time investment. Often, if you don’t give this task enough attention, your whole business will suffer. So, it may seem like a human resources person, or whole department is a top priority. Not necessarily so. You can save money without sacrificing employee quality by using outside staffing solutions. Try a solution you can access on your smartphone, like GoodHire, to get started.

2. Invoice Financing Instead of Financing and Collections

Invoice financing is a two-part tool. First, you may not need to pursue traditional loans if you use invoice financing, because you'll get money from the invoice as soon as you issue it, so that you can fulfill the work with the benefit of having cash on hand. You don’t need the same credit rating or company history to take advantage of invoice financing as you may if you were approaching a bank for a loan instead.

The second problem that invoice financing can solve is the hassle of having a collections team, or of asking your receptionist (or other staff) to track down your payments. The factoring company will do the work of tracking down the payment on your behalf. With nonrecourse factoring you have even more security if the factoring company is unable to receive payment.

3. Hootsuite Instead of a Social Media Team

Having a diverse social media strategy is smart, because some platforms get more and less popular with different demographics overtime. However, you likely find that it would be too much work for your marketing team, or for you, to post to any more channels than you already have. Inactivity can be more harmful to a brand than just not having the account at all. Use Hootsuite to post to multiple accounts all at once, and schedule your posts for the future, so that you don’t have to interrupt every day with your posting schedule.

4. Loyverse Instead of Paid Point-of-Sale

Loyverse is a free option for companies without a point-of-sale solution and those that don't have the resources to dedicate to a loyalty program. This POS and inventory management software will show you basic sales analytics, making it a very useful software option for SMEs.

5. Telzio Instead of a Phone Network

Sometimes, even when you want to stay lean, you’re tempted to invest in business infrastructure, like a phone network. If you absolutely need one, try using Telzio instead. It allows you to set up a system over the Internet, which allows your team to take calls anywhere. It’s more flexible and suitable for the realities of modern business.

Whether you'd like to learn more, or you're ready to take the jump and reap the advantages of financial solutions like invoice financing and non-recourse factoring, reach out to us at J D Factors. Our experienced team is here to help SME's like yours.