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Why should any business use invoice factoring?

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article image Why should any business use invoice factoring?

AR Cash flow outline some of the many services provided by an invoice factoring company.

Invoice processing

Factors can take care of a lot of the work related to invoice processing, including check deposits, updating payments and generating routine reports, thus saving the client substantial time for other priorities.

Ability to offer customers better credit terms

When your clients use factoring, they will be able to offer their own customers better credit terms without any negative effect on their own cash flow. This will help the business grow and result in more sales and better credit terms.
Limitless capital

The only source of financing that grows as sales grow is invoice factoring. When sales go up, so does the cash flow providing the business with more money. This enables the business to keep up with growing demand for products.

Capitalizing on incentives for early payments and volume purchases

The business can now take advantage of discounts offered for early payments on bulk purchases. Since they now have the money to pay for the purchase, every discount will not only bring down their cost of factoring, but also save lots of money. In fact, factoring, over time will literally fund itself.

Stop offering discounts to customers for early payments

When a business uses factoring, it gets its money right away. This eliminates the need to offer discounts to customers for making early payments. This means big money savings when the discounts are not offered.  Combined with the money saved in discounts on volume purchases for making its own payments, the business can enjoy a lot of savings. This is likely to offset factoring costs. In our experience when a client offers a customer an early payment discount, the customer usually takes the discount and then pays at 30 days anyway defeating the purposes of the discount.

No giving up equity

Factoring saves the business owner from giving up equity in the company. If he were looking for venture capital or partners to bring in cash flow he would have to.
No additional debt

Since factoring is not a loan, there is no question of debt or repayment.

Reporting system

The factor generates comprehensive management reports for improved cash flow management.
Location is not an issue

A factor is not restricted by geographic limits. It can work regardless of geographic location. While the business can have customers anywhere in the world, so can the factor.
No business can afford to ignore ‘factoring’ as a potential solution to their cash flow needs, especially when it can practically help the business become self-sufficient in its cash management and also realize profits.

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