Money seems to drive us whether we want it to or not. Perhaps it is the culture or the economy we are living in today. Since we cannot get around the situation of needing money, we can at least find the best situation for ourselves. In particular, we are talking about businesses needing a strong cash flow in order to remain in operation no matter the economy. In recent years more businesses have had to seek new ways to increase their cash flow. More importantly, businesses have struggled since 2007 and those still open are beginning to struggle even though the economy is supposedly in repair.
It is an unfortunate situation to be in, but any company that does not have a steady cash flow needs to find a solution and quickly. One possibility includes examining invoice finance companies. These companies provide a quick solution to your cash flow requirements. It is not a magic answer, but you can certainly benefit until you get back on track.
Finance companies offer you factoring and discounting products. Factoring is often the more popular option given how it works. With factoring you actually sell your invoices to another company for a small fee. The fee can be 15 per cent of the open invoice. You get 85 per cent of the amount from the finance company. Since you sell off the ledger the third party will conduct the collections needed to ensure full payment is made. This leaves you time to get back to business basics.
Discounting is where you keep the ledger in your control, but you still get financial help. It is more like a loan in that you obtain funds, but must make monthly payments to the company in order to pay them back for the invoice funds you received. The monthly payments are supposed to be from the incoming income you obtain from client payments.
Discounting is technically more confidential because you retain full control of the ledger. Your clients are not aware of your invoice discounting choice. With factoring they may suspect that you have gone through a different process of late. This is because the factor makes the collection calls under their name but as representatives of you. It can cause concern with some clients, thus jeopardize your relationship. The decision to go with one finance option over another is yours, but you should be aware of the benefits of both.
Tags: Business Basics, Cash Flow Requirements, Client Payments, Collections, Economy, Factoring, Finance Companies, Finance Company, Financial Help, Invoice Discounting, Invoices, Magic Answer, Money, New Ways, Open Invoice, Quick Solution, Steady Cash Flow, Third Party, Unfortunate Situation