Do you run a business where your capital is tied up in factory accounts receivable. Don’t worry, this issue is quite common and many business firms face this problem day to day basis. The good thing is that there is a type of financing available that can free some of your capital. This process is called factoring invoices. This process can help you to collect receivables.
In many invoice factoring companies,invoices are their largest assets which shows on their balance sheet. When you run your own business the invoices get converted into cash slowly which often depends on the credit of your customer(s). When experiencing such situations in business, the best method for you to follow is to use invoice factoring to generate a consistent cash flow while also reducing administrative collection costs.
This cash flow method operates best only when your business is running tight with few disputes over invoices. Most issues can be easily solved by releasing your company’s cash flow. In invoice factoring, you will obviously be charged a fee but this the right partner, it is nominal in respect to your invoiced sale.
Now lets have a look the benefits of factoring invoices. Through factoring, your company can focus on more productive activities – the main benefit of factoring accounts receivable is that your company will receive its cash more quickly. The less noticeable benefit of factoring is that your company is able to pay its own bills more quickly and increase its credit rating with its suppliers and credit agencies that work within their groups.
Also, you may have noticed that a large part of the company’s capital gets stuck in inventory. Through this process, you can also benefit by freeing up money that can be used to by different inventory.
Another benefit of factoring is that it is much easier to setup than a traditional bank loan.There is no need for you to submit tax returns or business plans. So make sure the invoices are more current to get more money. In this way, your business can focus more on productive activities.
The process improves your cash flow – factoring invoices will give you greater flexibility to improve your cash flow. Through releasing cash flow it will improve the business growth. The working capital that oilfield factoring provides can also be used to mature businesses. This newly found working capital can now be invested in other projects. The method improves many key business activities.
The method will also benefit your company by protecting it from many bad debts – the dedicated professionals will send out a statement to the all of your customers and run credit before allowing you to sell to new and existing customer base. It is like having a free credit department on staff with tools that many businesses could only wish for.
Invoice factoring companies will also assist in collecting hard to recover payments and will maintain detailed accounts of your transactions.