Analyzing Your Cash Flow

Posted by Factor Funding Co. on March 24, 2015

A healthy cash flow is vital to your business' overall success. If your cash flow begins to suffer, you face the possibility of not having enough money to cover everyday expenses, let alone those expenses that come with taking care of your customers.


Even if your cash flow is currently healthy, you should still consider if at some point you may need to secure financing to bolster your business. You can head off any future monetary problems by analyzing your cash flow and considering factoring as a source of funding for your company.

Analyzing Your Cash Flow

Even the seemingly most steady of cash flows could be faltering unexpectedly. You can determine how great of a risk you could face if or when your source of profits fails by considering your current financial obligations and by looking at your goals for the future.

As you may be aware, some of your current expenses may include:

  • Making payroll each pay period
  • Covering operational costs
  • Buying sufficient inventory
  • Paying for vendor services
  • Covering overhead costs

If you barely have enough to cover these costs now or if you are failing to meet some of them on a regular basis, you may consider factoring your invoices to boost your cash flow.

Further, a healthy cash flow is vital to your business' future, particularly if you expect to grow at a rate that keeps you at pace with your competitors. Having enough money now lets you focus on goals that you may have set for your business in the future, such as:

  • Expanding into new markets
  • Courting new clients
  • Restructuring your business to increase profits
  • Making investments or buying more lucrative assets
  • Merging with or acquiring other businesses

All of these goals require that you have enough cash on hand to pay for the expenses that inevitably will occur as your company grows. Rather than let unpaid invoices spiral your company into illiquidity, you can factor them and get the cash you need today and for the future.

Factoring Your Accounts Receivables

Factoring your outstanding accounts receivables proves to be a relatively fast and easy process. In fact, it can take less time for you to be approved for factoring than it would for you to be approved for a bank loan. Many factors can extend financing to you in a few days' time, if not sooner.

Even more, if your credit rating has prevented you from seeking a bank loan, you can be assured that the approval process for factoring focuses less on your score than your invoice clients'. As long as your clients have steady payment histories and reasonable credit scores, you may expect to be approved for the money you need now.

In fact, some of the distinct advantages that come with factoring your accounts receivables include:

  • Access to Fast Money: You generally can have your money in a matter of days, if not hours.
  • Flexibility of Money's Use: You will not have to provide an explanation for why you need financing.
  • No New Debt: Your factor is not extending a loan to you. You are selling your invoices in exchange for cash.
  • No Collection Obligations: Your factor takes over collecting on the unpaid invoices, letting you focus on running your business.

Even with these unique advantages, factoring does come with a few conditions about which you should know. These conditions involve selling your invoices at a discount. You may receive about 70 to 90 percent of their face value.

You also may potentially jeopardize your relationship with steady clients if you utilize factoring. In some instances, it may benefit you to offer your steadier clients a discount for paying early or giving them an extension on paying their invoices, particularly if you fear that they will leave you if you factor their account.

Your cash flow gives you the freedom to enjoy profitability today and growth tomorrow. Rather than jeopardize your business' success, you can boost the money you have on hand now by factoring your unpaid accounts receivables.

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