As a small business owner, you may be wondering if you have made the right decision for yourself and the success of your career. We strive to educate you on every type of financing available for you as a small business owner specifically to put your worries at ease. One type of financing that you may not be familiar with is Account Receivable Financing, which is a way to fund your business by financing outstanding invoices from late-paying customers. By subscribing yourself to the concept of invoice factoring you can financially support your company by using your accounts receivable as collateral to obtain the funding you need to keep yourself afloat. In a sense, you are just cashing in on untimely payments in a larger way that is beneficial to the financial future of your growing business.
Aligning your business with this concept ensures that you make a profit every time one of your paying clients are “late to the party”, so to speak. Accounts receivable financing is how small and medium-sized businesses ensure they can receive payments for their accounts receivable on time, every time. It is simply a smarter way to do business. Large corporations meanwhile, commonly use net payment terms as a way to flex their muscles at smaller businesses. Larger companies will frequently require net terms as a cost of doing business with them. This is a way for the small business to gain their upper hand.
Of course, to properly initiate this concept there are things you must be sure to stay on top of. It is vital to stay organized as you will need to get your accounts receivable in order, before you even think about factoring. You need to know which customers have outstanding invoices, if they are past due, and how much money you have tied up in your A/R portfolio. To do this, keep clear terms and conditions for each of your customers. A smart way to stay on top of the kind of customers you are working with is to check the credit of each of them to ensure a safe relationship between you and your clientele through the process. Keep a strong and honest relationship with your clients and establish initial credit limits beforehand with each new customer. Account receivable financing may be a smart solution to a temporary cash flow problem for you and your business.