Invoice factoring basics and benefits explainedPosted by Mahmoud Wiggins on February 23rd, 2021 When companies need to optimize cash flow, they can sell their outstanding invoices at a small discount to a factoring company. The factoring company then collects the debt. Large companies increasingly stretch invoice payments from 30 days to 90 days or more, putting small operations in a bind as their vendor payments, employee salaries, and taxes are due whether their customers pay or not. The solution for many companies is invoice factoring. Businesses can sell their accounts receivable at a discount and get paid immediately, which allows them to get the cash flow they need to meet current operating costs without incurring debt. Advantages of invoice finance factoring Invoice factoring takes the billing and collection off your shoulders. It can also improve relationships with customers by taking payment matters out of the interactions. Factoring can allow companies to pay vendors more quickly and take advantage of their discount offers, saving you money. Invoice factoring can benefit small and medium-sized companies serving a wide variety of industries in many ways. Here are some key benefits of invoice factoring solutions. 1. Immediate funds: Receive a cash advance on qualified receivables in less than 24 hours. 2. Eliminate bad debt: A non-recourse factoring program takes on the risk of bad debt, eliminating any expense from your income statement. invoice finance factoring 3. Collections services: Factors handle debt collection professionally and productively, allowing your staff to focus on high value-added activities. 4. Invoice processing: Factoring solutions will handle invoice processing, including posting invoices to a computer, depositing checks, and entering payments, etcetera. 5. Eliminate overhead: Reduce overhead costs associated with processing invoices and eliminate overhead costs from collections. 6. Better credit terms: Offer more generous credit terms to customers to increase sales without negatively affecting cash flow. 7. Unlimited capital: Invoice factoring is the only source of business financing that grows with your sales. As your sales increase, more money becomes available to you. 8. Early payment discounts: If you can save 2% of your cost by paying bills within ten days, this adds up to significant long-term savings. 9. No debt: Factoring is not the same as a small business loan. There is no debt involved and no monthly payments to 'muddy-up' your balance sheet and make it difficult to get other types of financing.Like it? Share it! |