5 Ways Invoice Factoring Can Offer Quick Financial Solutions to Your Business

StrategyDriven Managing Your Finances Article | 5 Ways Invoice Factoring Can Offer Quick Financial Solutions to Your BusinessSmall or established businesses need effective cash flow to run their operations. However, maintaining a proper cash flow can prove hectic with the market and economic changes. A business should seek alternative funding to keep its operations active and productive. Besides applying for a loan, businesses can utilize invoice factoring as an alternative financing option. Pointed below are the ways invoice factoring can offer quick financial solutions to your business.

Offers Financial Flexibility

It is prudent for your business to maintain flexibility in cash flow. Your business needs to fund its operations and sustain its workforce despite hard economic times. Invoice factoring financing becomes vital as it offers your business the flexibility it deserves. You can use the unpaid invoices to get the funds you need at any time. You, however, need to find and work with a reputable factoring company to enjoy the flexibility. Remember, invoice factoring makes cash available to your business and helps avoid financial struggles that might affect its operations in the end.

Helps You Save Time and Resources

Note that applying for a bank loan means waiting for days before getting approval. The approval chances are also minimal, and your business can get affected as you wait for the approval. Most banks and credit unions also dictate that you provide collateral to process the loan. This, in the end, can be inconvenient, especially to a struggling business. However, using your unpaid invoices to secure funds saves time and resources. You avoid worrying about collateral and wasting during the application process.

Easy Application Process With Higher Financial Approval

Financial history, credit score, and collateral determine your chances of getting a loan approved by the bank. You must meet the criteria and the requirements for your business to get the funds it needs. This is, however, different when you consider invoice factoring. You don’t need to worry about collateral or your financial history to get approval. You only need to show your financial history to the customers. The factoring company needs to be confident about the payment history before taking your unpaid invoices.

Credit Control

Collecting your payments and managing the credit can have different impacts on your business. You need to be effective with debt collection to keep your cash flow steady. It is, however, hard when you have to deal with sneaky customers. You get quick financial solutions by considering invoice factoring as you avoid the stress of dealing with your customers. Note that the factoring company you sell your invoices to handles the payment collection process and credit control. You get more time and space to manage your business.

You Use the Funds for Any Business Purpose

Unlike other forms of loans, invoice factoring provides you with the funds to use for any business needs. There are no restrictions or conditions on where and how to use the funds. You can improve your working capital, fund expansion, purchase new stock and equipment and add more staff with the funds you get through invoice factoring. You enjoy financial freedom by working with a reputable factoring company.

It is crucial for a business to maintain its cash flow for its operations. However, it can prove hectic when you lack a proper financing avenue. As much as applying for loans can prove beneficial, the process can be overwhelming. You need invoice factoring to get quick financial solutions and enjoy other benefits, as highlighted above.

Why Traditional Invoicing Is a Bottleneck: Do These 4 Things to Remedy It

StrategyDriven Managing Your Finances Article | Why Traditional Invoicing Is a Bottleneck: Do These 4 Things to Remedy ItThe accounts receivable departments must process incoming payments every day and keep financial records up to date. Unfortunately, some companies do not complete these tasks on a daily basis and create bottlenecks. The processes could lead to longer waits for profits, and some companies cannot wait that long.

By following better practices, the business owners can avoid bottlenecks and keep their cash flow coming each day. Several common mistakes made by AP departments can also create further unnecessary complexities.

1. Try An Invoicing Service

Many companies face difficulties with managing all invoices for their customers, and they often turn over some accounts to service providers that help the company collect the overdue balances. Unfortunately, many collection agencies use tactics that do not get the job done and alienate the customers. Even the best customer the company has could face circumstances that cause them to miss a payment, but this doesn’t mean they deserve to constantly get harassing phone calls.

Instead of using these more traditional tactics, many companies are using less invasive practices to give customers a more convenient opportunity to pay their outstanding balance without calling the company to complete the payment. These methods could allow the customer to follow a link in an email from the company that guides them through a more convenient payment process.

The collection efforts won’t interfere with the customer’s personal life or make them feel overwhelmed. The service provider sets up a link that redirects them to an online payment solution and the process is quite simple. Business owners can learn more about using instant invoices by contacting a service provider now.

2. Speed Up Invoice Processing 

Another issue that many companies face is a failure to process and send out the invoices. Companies may have a larger collection of clients and invoicing is a major task for the AP department. This could become a serious issue for the company and prevent cash flow from coming in on time. Some companies pick a specific day of the month to print a huge collection of invoices instead of processing an invoice immediately. Customers that don’t know how much they owe the company cannot send in a payment and update their account. They need an invoice right now.

In turn, the AP department becomes overwhelmed with the number of invoices they must send out at the end of a week or month. These slower processes just delay the payment process and make the company wait longer to get their payments from customers. If the company implements practices that invoice the customer immediately and sends out the invoice, the company receives more payments throughout the month and eliminates common cash flow problems.

3. Analyze Customer Payment Habits

Companies must also analyze their customers’ payment habits, and they must determine when it is time to let certain customers go. A customer with a persistent history of tardy payments isn’t just hurting their own credit or making themselves unworthy of using credit. They are also slowing down the business and preventing the business from collecting the money they are owed by the customer.

By using data mining practices, the company can generate reports that show them which customers are late with their payments and which customers have a history of getting late charges. While companies do not want to discourage customers from buying their products or hiring them for their services, there comes a time when some customers becomd a major problem for businesses and delays the time it takes to get their profits.

Customers that never pay their payments on time create more of a problem for the business than letting the customers go. For example, if the company allows customers to buy products and pay later, the customer must pay later and settle their debt to the company. However, if the same customer is late persistently, they are not a valuable customer and are simply making it more difficult for the company to operate. It’s time to let them go by blocking their account.

4. Ensure Access for Workers Who Need the Information

Another major dilemma with companies that use outsourced customer service or collection services is that they don’t have the information available. All workers who will manage customer accounts need access to the customer files. If they cannot open a customer’s account and review the data, the workers cannot accept and process customer payments.

The business owner will need to review all connections to their database to ensure that the workers have the correct credentials for the task. Customers do not want to call in to make a payment and face one or more transfers to other departments. This takes up the customer’s time, and it will discourage them from doing business with the company. Companies that have automated systems must streamline these processes to ensure that customers’ payments are accepted and processed immediately.

By invoicing immediately after the service or order, the company can also make it possible for the customer service representatives to find the outstanding balance. If the invoices haven’t been processed, they will not show up in the system. This could lead to customers facing delays that are not convenient for them and make them want to get the same services or products somewhere else.

Accounts receivable departments must take on the task of collecting all outstanding payments for the company, and they must follow more streamlined processes. For many companies, slowdowns in invoicing make it difficult for them to collect the customers’ payments in a timely manner. Some companies do not have the time or resources to process invoices only once a month, and the process could prevent access to high volume of capital that they need during the month.

When reviewing strategies for processing invoices, the companies could find a more efficient option that makes it easier to collect now. By using immediate invoices with a direct link to the payment system, they can collect the money faster and update the customer’s files instantly.