Sort Out Your Company’s Finances With Accounts Receivable

If it’s standard in your industry to have long repayment terms, you’ve likely been frustrated with a client or two, especially if they have a big unpaid invoice. Business can be booming, but when your clients take forever to pay, you may see a significant gap in cash flow. This gap can keep you from fulfilling orders and satisfying other clients, but shortening the payment window may drive clients to the competition. So what do you do? With accounts receivable financing, you can sort out your company’s finances while keeping customers happy. 

How Does It Work?

When you need cash, you hand over an unpaid invoice to a factoring company, which then gives you almost the entire value of the invoice in cash. The company keeps a fee, then you’ll get the rest of the invoice once the client pays. Doing this for all your invoices may cost you more money than you’re comfortable with overtime, but it’s a relatively small fee when you consider that you’re able to keep a steady cash flow. 

Once you’re established with a factoring agency, this process moves pretty quickly. By fostering a good relationship with a company like this, you can utilize their services whenever you need them.

How Do You Prepare? 

The first thing you should do, before even settling on a financing company, organizes your client list. Who pays early, and in full? Who never pays on time? If you get frustrated dealing with a client, your financing company will get frustrated, too. Your financing company won’t care about your credit and payment history, but they will care about the client’s credit because this is where their money is coming from. You also need to consider the company’s customer service practices. If your clients have a bad experience with your factoring agency, you may lose them as a customer. 

On the other hand, if you have a client that never pays on time, or always tries to justify never paying in full, it may be time to cut them loose. This way you can prioritize your better, larger clients and focus on keeping them happy. 

Every business is likely to experience a gap in cash flow from time to time and accounts receivable financing can be a great solution. With a little research, you can foster a relationship with a financing company that will benefit you for years to come.