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How Invoice Factoring Can Improve Your Cash Flow - First National Capital Advisors

How Invoice Factoring Can Improve Your Cash Flow

by / Friday, 01 September 2017 / Published in Financing Blog

It’s an unfair reality that many good businesses with steady clientele continue to struggle with cash flow. Just because you provide a quality service or product doesn’t mean accounts will be received in a timely fashion, and this can lead to serious problems with working capital. If you’re waiting on clients to settle their fees and wondering how you’ll cover bills in the interim, invoice factoring could be the perfect source of alternative financing for your company.

Don’t Borrow

If you’re caught between receiving cash and paying your employees, there’s really no option but to make sure your workers get their checks. While you could take out a loan or use a line of credit, that will end up costing you a bunch of money in fees and interest. Conversely, if you sell an invoice for services that you’ve already rendered, there will be no additional fees or compounding interest payments that cripple your cash flow every month. The factoring company will pay out slightly less than the actual price of the account, but you’ll get your money immediately and won’t have to worry about dealing with collections.

When compared to standard lending, invoice factoring is a far superior option. You need to be able to prove the creditworthiness of your customers and should always confirm what sorts of fees the factor charges. Beyond that, all of the hassles associated with a regular loan are eliminated. Your business will also avoid adding any additional debt to the books.

Save Time

Getting paid is the main objective with invoice factoring. It just so happens that this type of financing comes with an additional benefit: time. After you sell off your invoice, the collections process is taken off your hands. That alone is probably worth whatever fee the factoring company is charging. Not only will the factor save you countless hours that would otherwise be spent following up about payments, the company will also get money into your account far faster than a customer would. This extra time will allow you to see more clients, generate more invoices and increase your cash flow. For companies that work with dozens of people and have to deal with sporadic payments and insurance processing, eliminating the collections battle is a massive help.

It’s difficult enough to run a business; it shouldn’t be made harder by providing a service for which you don’t get paid. Instead of struggling to get by each month while waiting on payments, let an invoice factoring company come to the rescue.

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