Small and large businesses alike have to go through the trouble of sending out invoices to customers, then waiting on those customers to submit payment. Since some businesses operate on a net 30 payment plan or longer, business owners can wait as much as a month or more before they receive their payments. For small business owners in particular, waiting on outstanding invoice payments can put a real crimp in the cash flow they may need for payroll, expenses or repairs. To avoid this situation more businesses are turning to invoice factoring to help them free up their income and get their money faster. Here are three reasons to use invoice factoring.
Immediate Access to Cash
When you sign up for an receivables factoring account, you're able to receive most of your invoice payments right away rather than waiting for them. Companies that provide invoice factoring are willing to purchase your outstanding invoices and then provide you with those funds in cash within 10 days. Generally, these companies charge a small fee for their services but the ability to receive cash immediately instead of waiting until a customer submits payment can be a huge benefit if you need to use the money right now.
Avoid the Hassle of Seeking Payment
Once you sell your invoices to an invoice factoring company, you also sell the right to collect on those receivables. This means that the invoice factoringcompany is now responsible for collecting those payments instead of you. Small businesses who invoice a lot of accounts or who have several customers that pay their invoices late can enjoy the freedom of not having to chase after their customers to pay their receivables when they use invoice factoring.
Flexible Cash Availability
Another reason to use accounts receivable financing is because it gives you flexible access to cash. If you were to take out a business loan at a bank, you would have a fixed credit line. With invoice factoring, however, you don't have a credit ceiling. Rather, the amount of money you can receive is based on your outstanding invoices. If your business grows in sales, you'll be able to receive a larger amount of money determined by the amount of invoices you submit.
There are many reasons to use invoice factoring for your business. It helps increase your immediate cash flow, it keeps you from having to pursue payment for your invoices, and it gives you flexible access to cash. If you're interested in pursuing invoice factoring, talk with a qualified invoice factoring finance company about your options.