Have you ever wondered if there was a way to gain more control over your company’s cash flow? Many business owners have found that accounts receivable financing provides the solution they seek. The question on your mind is whether this financing solution is right for you and your business. Here are four of the top reasons why factoring your client invoices makes sense.
1. Allocating Funds for the Month is Easier
One of the more attractive advantages of factoring receivables is that your funding partner provides most of the value of your invoice batches up front. Your company bills customers on a monthly basis so each batch is worth a substantial sum. The fact you factor each batch means most of the cash is in your operating account a day or two after the invoices are sent to your clients.
Instead of waiting for clients to submit payments, you have the cash in hand to allocate for all of the basic operational expenses. From supplies to payroll, the money is there during the first week of the month. That means you can spend more time focusing on running the business and less on if enough cash will come in to pay a particular debt on time. For more insights, FundThrough has resources and information available on their website.
2. You Streamline the Collection Process
How much time and resources do you devote to collections? It may be more than you realize. When you arrange for funding via invoice factoring Canada, your partner assumes control of the collections process. Your accounting team can spend their time handling other aspects of the company finances, including ways to use your revenue stream more efficiently.
3. You Reduce the Potential For Creating New Debt
While creating some amount of debt and paying it off is great for building a credit rating, it’s important to not take on too much. One of the benefits of having most of the cash from the invoices early on means you can keep the creation of new debt to a minimum. Even if you do need to use a company account for something like office supplies or to pay for the registration at an upcoming trade show, the funds your factoring partner releases as customers send in payments help you prevent the debt from rolling over into the next 30-day period.
4. You Have the Chance to Improve the Company Credit Rating
Consider how your current approach impacts the company credit rating. Do you send payments to your creditors a few days after the due dates? Late payments do more than create additional interest and fees that must be settled. They can also negatively impact the company credit rating.
When you are part of a factoring finance arrangement and use the money to pay off your monthly obligations before the due dates, you accomplish more than avoiding finance charges. You also ensure remarks on your credit reports indicate the business pays debts on time. That will come in handy if you do need a business loan or a line of credit in the future.
Invoice factoring is a viable solution worth considering. Take a good look at the way the receivables are handled currently. Identify specific benefits that factoring would provide. You could find that receivables financing is the tool you need to make your company stronger and more competitive than ever.