Are your clients taking up to 60 days to pay their invoices? This is a very common situation and a significant cause of stress to many business owners. Unfortunately, having a profitable business does not necessarily mean that you have a reliable cash flow. In fact, the contrary is often true, as sky-high profits often find themselves married to an erratic cash flow.
How can this be? Simple. Your clients are paying you in 60 days, but you need to pay employees every week, rent and suppliers. The big picture says that this should all work out eventually, but the immediacy of it all says that you would not have much cash at your disposal. This is unless you have a lot of money in the bank to cover the deficits.
If you are a new business owner, or even a "promising" one, or somebody without enough spare funds in the bank, what do you do? Get a business loan? Unlikely. Business loans are hard to get. Now what you would want to consider is invoice discounting - heard of it, by any chance? Factoring companies offer invoice discounting, not banks, which makes this a totally different animal all together.
Invoice discounting is so simple even a child can figure it out - you sell your invoices at a discounted rate in exchange for cash. The ramifications in terms of value are none too labyrinthine, to be honest. Are you willing discount between 1.5% to 6% from your invoices to get paid now? A lot of business owners offer an incentive - a 2% discount if their clients pay them within 10 working days. That last abstraction isn't much different from how invoice discounting works.
Of course, invoice discounting (or invoice factoring as it is also called) is not for every business. This is best utilized if you have profit margins of 15% or greater and if you use the advance funds in paying for business-related costs or new business ventures.
Factoring companies would invariably buy your invoices on a two-installment basis. The first installment, referred to as the advance, covers up to 85% of the invoice. The remaining 15% (less the discount) is rebated once the customer actually pays the invoice.
Invoice discounting is easy to obtain and can be set up in days. Really, all you would need would be invoices from your actual clients in order to qualify. So, if you are sitting on a whole bunch of slow paying invoices, be sure to consider invoice discounting.
How can this be? Simple. Your clients are paying you in 60 days, but you need to pay employees every week, rent and suppliers. The big picture says that this should all work out eventually, but the immediacy of it all says that you would not have much cash at your disposal. This is unless you have a lot of money in the bank to cover the deficits.
If you are a new business owner, or even a "promising" one, or somebody without enough spare funds in the bank, what do you do? Get a business loan? Unlikely. Business loans are hard to get. Now what you would want to consider is invoice discounting - heard of it, by any chance? Factoring companies offer invoice discounting, not banks, which makes this a totally different animal all together.
Invoice discounting is so simple even a child can figure it out - you sell your invoices at a discounted rate in exchange for cash. The ramifications in terms of value are none too labyrinthine, to be honest. Are you willing discount between 1.5% to 6% from your invoices to get paid now? A lot of business owners offer an incentive - a 2% discount if their clients pay them within 10 working days. That last abstraction isn't much different from how invoice discounting works.
Of course, invoice discounting (or invoice factoring as it is also called) is not for every business. This is best utilized if you have profit margins of 15% or greater and if you use the advance funds in paying for business-related costs or new business ventures.
Factoring companies would invariably buy your invoices on a two-installment basis. The first installment, referred to as the advance, covers up to 85% of the invoice. The remaining 15% (less the discount) is rebated once the customer actually pays the invoice.
Invoice discounting is easy to obtain and can be set up in days. Really, all you would need would be invoices from your actual clients in order to qualify. So, if you are sitting on a whole bunch of slow paying invoices, be sure to consider invoice discounting.
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