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.
