Why Using Invoice Factoring Is a Smart Business Move

Many businesses struggle with having enough money on hand to meet financial obligations. This is the definition of a “Cash Flow” problem. To address this problem, companies generally take one of two approaches:

 

  1. Use other people’s money (OPM), i.e., borrow; or
  2. “Bootstrap” the business by using its own assets and financial resources.

 

Most business owners instinctively look to borrowing as the solution. This article discusses Bootstrapping as a viable alternative.

Other People’s Money

Using OPM involves either equity financing (selling away a piece of the business – and thus part of your autonomy) or debt financing (borrowing). This article focuses on debt financing.

“Debt” is the money owed to another person or institution. If used to address a Cash Flow problem it can be an albatross around the neck of a company. When a business “borrows” money (i.e., takes out a loan), it incurs a debt that must be repaid. The repayment includes both principle (the amount borrowed) and interest (the fee to be paid to the party that lent the money).

Debt puts a constant demand on cash flow. That’s because you are obligated to pay back the loan through monthly installments. Whether your business is having a good month or a not so good month you must direct funds to the lender or face the possibility of default. If you default, the lender has the right to foreclose and take whatever assets are necessary to pay the debt in full.

OPM’s Impact on the Balance Sheet

The act of borrowing forces a double entry on a company’s Balance Sheet. The cash acquired by virtue of the loan becomes a “Cash” Asset on the books. However, an offsetting Liability must also appear because that money is not yours and must be paid back.

This is an important distinction because one of the ratios used in assessing the financial health of a company is the Debt to Equity Ratio. This ratio is calculated by first taking the value of a company’s Assets and subtracting its Liabilities. The remainder is the company’s Equity. The Liability value is then divided by the Equity value to determine the ratio. The higher the ratio number the greater the risk that the company will not be able to meet its loan payment obligations.

This ratio can impact the ability to borrow more money. It can also impact the willingness of vendors to extend payment terms to your business. A highly leveraged company can be a poor credit risk which can cause vendors to demand cash payment for merchandise.

Bootstrapping the Company

Bootstrapping does not have the downside potential of borrowing. When bootstrapping you use the existing resources of the company to leverage growth. This leverage involves understanding all the assets your company has and how to capitalize on them.

For companies with business-to-business (B2B) and/or business-to-government (B2Gvt) transactions one of the best assets to leverage is its Accounts Receivable. Accounts Receivable (A/R) is the volume of money owed to you for product delivered and/or service rendered. It is a debt that another company or government agency owes to you.

Unfortunately, you can’t spend A/R. That money is not in your bank and can’t be used to meet payroll, buy material or pay taxes. You can, however, convert that A/R to cash without pressuring your customers to alter their payment terms. The solution is to factor the invoices. “Invoice Factoring” is the process of selling individual outstanding invoices for cash. It is a transaction that stays exclusively on the Asset side of the ledger in that it converts A/R to Cash. In an invoice factoring transaction you are not borrowing money; you are selling an Asset. Therefore there is no Liability entry on your books.

Under What Circumstances Can Factoring Be Used?

The utilization of Invoice Factoring is a right granted to a business by virtue of Article 9 of the Uniform Commercial Code. A business may “assign” the right to payment to a third party – a factoring company. There are very, very few situations where your right to assignment may not apply. This means that any B2B or B2Gvt enterprise can use Invoice Factoring as a means of resolving a Cash Flow challenge.

Which Financial Institutions Offer Invoice Factoring?

While a few larger banks have departments that do true Invoice Factoring, most do not. One reason is that, in general, the underwriting criteria for Invoice Factoring differ from that of a traditional business loan. But because banks are regulated by the Federal Reserve, those that do have Invoice Factoring Departments will typically apply the same underwriting criteria to both lending and factoring. This means they will look very closely at the personal credit and business credit of those applying for a factoring facility. If those scores are not good, the application will be declined.

Independent financing companies have greater leeway. Their primary consideration is the creditworthiness of your customer – the entity obligated to honor your invoice. If their commercial credit rating is good, the probability of winning a factoring facility is very high. Your company’s credit and/or your personal credit score will have little impact on the decision to fund.

Summary

When confronted with a cash flow problem, the majority of business owners impulsively look to borrow money. This is a viable route, but it important to understand the potential challenges:

 

  • It adds a Liability to your Balance Sheet
  • It affects your credit rating
  • It raises your Debt to Equity Ratio
  • It imposes an additional monthly demand on cash flow
  • It automatically creates the possibility of default and foreclosure

 

Bootstrapping and the use of Invoice Factoring is a reasonable alternative. It offers a quick and effective way for a company to use its existing resources to solve a problem. It is inexpensive, and, by law, universally applicable. Used correctly, it can help a company survive in difficult times and thrive when times are good.

Cash in the Barrel: Oilfield Service Companies Between a Rock and Hard Place When Seeking Financing

Many oilfield service companies have major cash flow problems, and it’s not their fault. Most of the big oil and gas companies pay their invoices in 30-90 days. Many oilfield service companies don’t have the cash reserves to wait for those payments; they have their own obligations to meet. Oilfield service companies have high cash demands and slow turnaround times, and business owners feel it where it hurts-their pocket books. This puts oilfield service companies between a rock and a hard place.

At first glance, it would seem that the company should open up a traditional line of credit so they can pump working capital into the business as needed. In principle, this is a great idea. Getting a traditional line of credit is very difficult for many oilfield service companies because most banks require substantial collateral, clean balance sheets, and long successful histories. In reality, few oilfield service companies meet those criteria. But, there is a solution. Invoice factoring.

Accounts receivable financing, or factoring has gotten a bad rap-and rightfully so. When this method of financing started becoming popular in the US, many factoring companies took advantage of growing businesses that were vulnerable and were charging sky-high rates and running off their customers with aggressive collection practices.

Today, invoice financing has a whole new face and is much more business friendly.

Invoice factoring allows business, such as oilfield service companies, to capture revenues that would have been locked up in slow payment of invoices. Factoring reduces the time it takes your business to get paid, so you can stay current on payroll and payables.

There are three main benefits of invoice factoring for oilfield service companies:

1. Predictable and reliable cash flow: The business’ cash flow improves immediately as invoices are created and sold.

2. Increased sales: Flexible credit terms give the business a competitive edge in its marketplace. Predictable cash flow allows more sales to large but slower paying customers.

3. Reduce debt and fund growth:The proceeds from the sale of invoices can be used to pay off debt, take cash discounts on purchases, acquire inventory, or capitalize on growth opportunities.

The way invoice factoring works is quite simple: the factored invoice proceeds are sent to the business in two installments. The first installment (usually 90% of the face value of the invoice) is sent to you within 24 hours after submitting the invoice to the factoring company. The second installment, also called the reserve, is remitted to you, less the factoring fee, when your customer pays the invoice.

Factoring companies don’t look at your business’ credit, but they look at the credit worthiness of your customers. Businesses that have tax liens, recent bankruptcies, or debtor-in-possession even qualify invoice financing.

Invoice factoring is the perfect tool for stability and growth in oilfield service companies. Factoring lines are designed to increase as your sales grow and self-liquidate as they cool off, which helps smooth the cash flow cycle through periods of price volatility.

Factoring and Invoice Discounting – What Are the Differences?

Whether you are a new business dependent upon regular cash flow, or anticipate an increase in sales and are eager to take advantage of it, then perhaps you should consider a factoring facility. There are many benefits to factoring and invoice discounting, and they could prove to be the answer to your cash flow problems.

If you are already familiar with factoring then you will have also heard of invoice discounting. The invoice finance market consists of factoring and invoice discounting companies; these can be operated by well-known big banks or independently run specialised companies. Each one sets their own criteria, capabilities and prices which can vary greatly.

Factoring and discounting are both quite similar, but you need to have an understanding of both before you can make a decision about which would suit your business needs the best. Here is a quick explanation and their main advantages.

Invoice Factoring – Factoring is a finance facility that enables you to raise finance based on the value of your outstanding invoices. Instead of sending out invoices and then waiting up to a month or more for the cash to arrive, you can change them into cash almost instantly. Many businesses just starting out have come to the realisation that factoring offers a more flexible source of working capital than overdrafts or loans.

Factoring an invoice basically means that your company is selling the financial rights of the invoice to the factoring company. The transaction is arranged as a sale and the factoring company will pay you the invoice amount in two payments. The first payment is known as the advance and given to your company as soon as you sell the invoice to them; this can be up to 90% of the invoice. The remaining 10% to 20%, the rebate, is received when the client actually settles the invoice.

When applying for a business loan you generally have to wait some time before finding out if the application was successful or not. Factoring is much easier and quicker as the waiting period is much shorter. As the factoring companies generally buy the invoices from the company, their main worry is if the company paying the invoices has good credit, this means that small businesses or those needing to raise cash have a much better chance of getting a factoring line, as long as they work with a strong client list.

There are various fees attached to invoice factoring services, they can be higher than the cost of a business loan and are decided according to the size of the line, the credit quality of the invoices, and how stable the client’s business is.

Invoice discounting – This works in the same way that factoring does, by freeing up cash from your invoices. The difference is that the lender does not offer credit management services to facilitate collecting your outstanding invoices. The service will just release up the invoice value, which can be up to 90%, and you keep control of the credit management. The remaining 10% is then accessible when your customers pay the invoice.

Cash is the livelihood of every company and if you are owed it but don’t not actually have it in your hand then this can cause you a lot of frustration and potential headaches. Invoice discounting lets you keep control of your debtor book as you are in charge of managing the credit, this means that your business is responsible for collecting clients outstanding due payments.

The advantages of using invoice discounting are that it has no affect on the relationship between you and your clients. There is no reason for them to know about the contract, particularly if you operate a confidential invoice discounting facility. This ensures you are able to carry on providing the same credit terms arranged prior with your clients without affecting the company’s cash flow.

Your business retains control of the company’s sales ledger and manages the credit control. By releasing up to 90% of the gross invoice value it provides your business with the answer to cash flow problems. Usually invoice discounting is cheaper than factoring as it doesn’t take up as much time, however, it does have a higher risk potential.

A quality factoring company will provide you cash against your existing debtor book and finance invoices as you raise them. They can also assist by collecting the outstanding payments by way of their credit management service.

Things to Consider Before You Turn to SME Invoice Factoring

Invoice factoring sounds like the perfect solution to a small business. Be careful though, my recent experience shows that, in some situations, this may actually be quite detrimental to the cash flow management of your business.

Firstly though, are we all clear on what is invoice factoring?

Invoice factoring takes over all the tasks involved with the running and maintaining of your sales ledger. This covers the tasks of raising your invoices to customers, payment collection and credit control. Furthermore, the factoring company will advance you upto 95% of the value of the invoices raised.

Sounds perfect?

Unfortunately if the factoring company starts to find that your customers are not paying within a set amount of time or they don’t “like” the customers you are dealing with, then they may start to cap your factoring advances. When your funds start to get capped and with no alternative arrangement in place, your cash flow will be instantly stopped and you could find yourself in a very difficult and stressful place.

So, think about your business now and try to manage this situation before the situation starts to manage you!

Here are 3 areas you should think about and how they apply to your small business accounting.

1. You lack visibility of your sales ledger process so will be dependent on Invoice factoring

The problem: Managing your customer invoicing and cash income may seem like an onerous and non priority task to you, especially if you want to be able to focus on growth. Invoice factoring can be a great solution, especially where your costs are heavily incurred upfront, e.g temporary staffing agencies. However, with handing over this processing task to a third party you will loose line of sight and visibility on who are the bad payers, how long is your cash collection cycle and what is the true requirement for working capital for your business. In the early days of your business, this may not be your concern, however as your turnover increases, factoring charges based on your gross turnover will increase proportionately. 4% of £100K may be affordable, 4% of £2m feels expensive.

To manage this situation: Think how long and at what level of turnover the factoring costs, in real terms, will become uncompetitive. Ensure you plan in advance an alternative financing strategy. Look at the terms of your agreement to ensure you will have the option to switch when the time is right and don’t tie yourself in for too great lengths of time on the promise of a lower factoring % today.

2. Slow responsiveness to queries and credit note requests.

The problem: Is it likely that customers will dispute or query invoices due to the nature of your business? Where a large factoring service is used, this will be remote to your offices. Any customers ringing up with queries are likely to be dealt with, in a less personal way than if this function were carried out in house. Customers with queries on invoices often find they don’t get a quick level of response for copy invoices or even agreed credit notes. This all results in payments being held back. Once again, this is going to impact on your advance if your agreement is that you are advanced up to a capped amount based on the age and balance on your sales ledger.

To manage this situation: Check the responsiveness of the factoring company by ringing them yourself. Do you feel happy that your point of contact is responsive to your queries as their customer? Is there cover when your point of contact is not about? If they are not responsive to you, you can bet your customers are getting an even worst service. Check also on the ledger notes and with your contact periodically. What types of queries and requests are being raised by your customers? This can give you an indication of where the process is failing. E.g are customers constantly asking for copies of invoices, could this indicate that invoice are not being sent out in time if at all. Check where you have requested a credit note, how long is it taking to get this credit note raised and you seeing it on the system. What is the principle way invoices and supporting documents are being sent to your customers, post or email and how long is this taking.

3. You have new customers who do not have sufficient trading history.

The problem: Factoring companies really do not like new companies in terms of granting advances on their invoices. With no trading history, they may simply decide not to factor these invoices but will happily take on the invoicing and credit control of these customers. This will all be wrapped up in your fee, so ensure that you understand the factoring company’s criteria for factoring a company for you. If you are paying for credit control, satisfy yourself that the factoring company is chasing your unfactored invoices as vigorously as your factored invoices.

To manage this situation: If there are going to be a number of your customers who are likely to not be factored, then it may be worthwhile you taking on your own credit control of your customers. In terms of the management of your cash, these customers will be critical and will probably need much closer watching until you are satisfied they will pay to terms and will not make an unnecessarily pull on your cash reserves.

Otherwise, check the processing time it takes for your Factoring company to raise, send out and collect payment from your unfactored invoices. Check the lead time your invoice factoring company believes it can work to. Now check with the customer on how quickly they are receiving the invoice. With some of the larger factoring businesses, they do not know themselves so don’t always rely on what they are telling you, carry out your own checks.

How To Improve Your Business’ Cash Flow Forecast With Factoring

Cash flow forecasting is good business practice for any business.

The cash flow forecast is divided into periods of time and shows the flow of cash through a business, what it starts the month with, what it receives, what it pays out and the balance of cash left at the end of the month. Normally the period will be months but where cash is tight a business may forecast their cash flow on a weekly or even daily basis.

The key issues that factoring addresses is that businesses tend to sell on credit terms to each other. That means that if you raise an invoice today it will typically be on 30 days payment terms. That means that it will be 30 days from today’s date until that invoice is due for payment.

The reality is that the time taken to pay that invoice can be much longer, may be 60 or even 90 days. There may be 101 different reasons for this but as examples, in some cases the customer may only pay invoices at the end of each month which means that an invoice received mid-month may only be paid at the end of the following month. In addition, businesses often stretch out their payments to suppliers, beyond their payment terms, in order to fund their own businesses. Put simply, if they don’t pay your invoice they don’t have to borrow the money from their bank in order to pay your invoice!

Below is an example of how delayed payment of invoices can affect the cash flow forecast of a small business:

Month 1 Month 2 Month 3 Month 4
Invoices raised (£)
10000 10000 10000 10000

Invoices outstanding at beginning of month
0 10000 20000 30000

Invoices paid by debtors during month
0 0 0 10000

Invoices outstanding at end of month
10000 20000 30000 30000

You can see that the business does not receive any cash from invoices being paid by debtors until Month 4.

Despite the lack of payment of your invoices the product still has to be purchased and delivered to the customer. Even if you are able to get credit terms from your suppliers it is unlikely that they will be long enough to account for the extended time that customers may take to pay you. Similarly, all your business expenses and bills still fall due each month and you need cash to pay them despite not having been paid by your customers. This creates a cash flow gap – the gap between the time that you have to pay your expenses and bills and the time that you get payment from your customers for the goods or services that you provide.

The cash flow forecast below shows how the expenses of the business fall due from Month 1 onwards but because of the delays in being paid by debtors, the business has a negative cash position throughout the forecast that will need to be funded from somewhere:

Month 1 Month 2 Month 3 Month 4
Invoices raised (£)
10000 10000 10000 10000

Invoices outstanding at beginning of month
0 10000 20000 30000

Invoices paid by debtors during month
0 0 0 10000

Invoices outstanding at end of month
10000 20000 30000 30000

Cash on hand at beginning of month
0 -6000 -12000 -18000

Cash received during month
0 0 0 10000

Expenses paid during month
6000 6000 6000 6000

Cash on hand at end of month
-6000 -12000 -18000 -14000

One solution is factoring bridges that cash flow gap, as soon as you raise your invoices a copy goes to the factoring company who then provide you with 85% (sometimes more) of their value immediately. That 85% means that you have the bulk of the money immediately, certainly enough to pay your expenses and bills within a business that has even the most reasonable of profit margins.

This cash flow forecast shows the same business but you will see that from Month 1 they receive 85% of the value of the invoices that they raise immediately:
NB Factoring charges are not shown in these examples but should be added into your forecast
That 85% is then repaid to the factoring company when the customer finally gets around to paying and the remaining 15% then becomes available to you from that payment (less the charges that the factoring company makes).

The above cash flow forecast also shows the effect of that balance of funds being past onto the business, after the customers pay, in month 4.

So by using forms of invoice finance such as factoring a business that could not afford to fund its cash flow gap is able to adequately provide enough cash to pay its business expenses as soon as it starts trading.

Cash Flow Forecasting for Milestone Billing

Forecasting cash flow for a one invoice project is pretty easy to understand. Cash will hit your bank account when that invoice becomes due. But what about projects that have multiple billing milestones? How can you predict cash flow for multiple future billings over an extended period of time?

*What do you really want to know?*

Part of the confusion with predicting cash flow is understanding which tool to use for the job. QuickBooks does have a cash flow forecasting report which is useful for telling you what should happen for the invoices and bills that have been entered into the system. This type of forecast will easily show you when payments should arrive in your bank account (if everyone pays what they owe on time) and when payments will leave your bank account (if you have every payment entered as a bill and pay them on time). If you want to know what should happen, the QuickBooks report will work just fine. If you want to know what will happen based on real life conversations….keep reading.

To generate the QuickBooks type of cash flow forecasting for progress billing, you would need to enter your invoices at the beginning of the project. You would then set a reminder to actually send the invoice on the date of said invoice. This approach is dangerous. There’s a pretty big risk that the invoice won’t be sent or, if the scope changes, no on will remember those invoices were out there. In those cases, your cash flow forecasting is wrong and you’ll end up calling collections for invoices that were never sent and/or aren’t owed.

*Real life is messy.*

In addition to the risks involved with invoicing early, the forecasting report is limited to what SHOULD happen. We all know real life is messier and you want to know what WILL happen to your cash. Every day you are having conversations about late invoices or accepting payment arrangements. You know that your biggest client always pays at 60 days, even though the invoice is due in 30 days. The only way to get those adjustments into QuickBooks is to change what should happen to what will happen.Do we really want to change due dates in QuickBooks to match what you know will happen? Absolutely not! We want our accounting systems to reflect our contractual agreements. We need to accurately reflect how past due invoices actually are. How else will you have effective collections conversations?

*A better tool for the job.*

The cash flow forecast, on the other hand, needs to be an estimation of what really will happen. A relatively simple Microsoft Excel spreadsheet is usually the best tool for the job. This spreadsheet will track when you expect your revenue to hit the bank account and when your bills and payroll will leave the bank account. The first column (each column represents a time period, usually a week) in your spreadsheet will begin with your bank account balance, then add incoming cash, subtract outgoing cash, and finally total to what you expect to have left in the bank. That ending bank balance will be the beginning bank balance in the next column (time period)…wash, rinse, repeat.

For our progress invoicing question, as soon as the project agreement is signed, we can drop the cash receipts into the weeks we estimate they’ll be received. Of course, the project may change course causing the invoice dates and cash receipt expectations to change. When that happens, we’ll make those adjustments in our spreadsheet and immediately see the impact on our cash balance.

Keeping an updated cash flow forecast will enable you to make smart money decisions. If you see the ending balance is going negative, you know you need to make some adjustments to your plan. If you want to make a large purchase or extend longer payment terms to a client, you can make those adjustments in your forecast; you’ll know if you have enough cash to support it before you make the commitment.

Invoice Factoring: A Tool To Revitalize Your Business

imagine a situation where your company is unable to strike a good deal owing to late payment to be made by its customers. You find yourself to be really missing out on “that big deal.” But now, you don’t really need to face the guilt of missing out such an opportunity. Thanks to the boom of factoring into the financial field! All that you need to do is approach a suitable factor and see yourself getting out of every dilemma.

Compared to loans and lines of credit, which require the clients to have tangible assets and strong financials, invoice factoring [http://1rstfunds.com/Small-Business-Cash-Advance.php] helps one to attain cash easily. Besides, most of the business enterprises today do not qualify for the criterion set by the traditional lending institutions. As such, invoice factoring offers them an excellent opportunity to gear up their business. Factoring allows them to avail immediate capital only at a nominal cost.

Invoice factoring is a blessing for business enterprises that are preparing to grow significantly because the factor takes up a part of the client’s credit risk for the end customers. It involves the factor’s bearing up of the loss in case the debtor fails to pay the invoice. This, therefore, is one of the critical services lent by factors to ambitious business enterprises.

One essential thing to know about factoring is that one doesn’t need to owe anything to the factor. The factor does not advance loans but buys invoices from the client. Since invoice factoring is not a loan, it is easy to qualify for it. All you need is a well-run business along with good customers. These are the only two potential prerequisites needed to avail the benefit of factoring. Many factors, infact, do not even demand high credibility on part of the customers. This makes factoring even more alluring to small business enterprises.

Besides, one of the primary objectives of any enterprise is steady cash flow. If cash flow freezes all of a sudden, there arises an immediate need to convert the receivables into ready cash. Invoice factoring thus offers the unique prospect to regenerate a dying business as it provides certain ancillary services as well as frees up internal resources.

Small Business Factoring – Remedy For Cash Flow Problems

When starting out as a business owner, no doubt you considered all the aspects of owning and operating a business. One neglected area of business ownership is cash flow. Neglected that is until the business owner realizes outstanding billed invoices are not being paid in a timely manner and ongoing operations can’t be funded since the necessary cash flow is not coming in as expected. What is the solution for a new business or one that does not have enough established credit to get a line of credit from the bank?

Small business factoring is one solution that offers quick access to cash collateralized by your own accounts receivable or outstanding invoices. First. let’s consider the situation and how cash flow problems came about in the first place. Generally, invoices are sent to customers with Net 30 terms, meaning the balance of the invoice should be paid by the customer within 30 calendar days. As many business owners know, seldom do their customers pay within a 30 day time frame with many going unpaid for sixty days or more. Odds are, your customer is experiencing the same cash flow problems as you, their vendor.

So how can small business factoring be a solution for cash flow problems which plague small and mid-size business? Invoice factoring can provide much needed cash within days rather than weeks for your business. This type of business funding is simple in methodology. For example, once a business supplies goods or a service to a customer and an invoice is generated for the total amount due, rather than sending the invoice to the customer, the invoice is sent to a factoring company.

The factoring company will take the invoice and evaluate the financial worthiness of your customer and if they meet the factoring company’s guidelines, they will send you, the business owner, a check for about eighty percent of the total value of the invoice. The other twenty percent of the outstanding invoice is held in reserve until the invoice is paid in full. Once the invoice is paid, the factoring company will send you another check for the remaining twenty percent less their fee.

The small business owner receives needed cash to operate his business within a few days allowing him to continue operating unencumbered by cash flow shortfalls. The factoring company assumes the risk of collecting the outstanding invoice and collects a fee from the total amount of the invoice. Small business factoring is an excellent solution for cash flow problems affecting your bottom line.

Landscape Contractors: Manage Your Cash Flow With Invoice Factoring

The market of landscaping comes in many forms from commercial and residential contractors, architects, grounds departments to educational institutions and suppliers. No matter what part of landscaping your business falls under there is always a need for managing your cash flow to grow. Have you been turned down for bank financing or have an inadequate bank line of credit? If so, invoice factoring may offer your business the assistance you have been seeking. In today’s instantaneous world, landscaping contractors now have access to working capital with quick turnaround. In some cases your business can immediately receive cash the day after the invoice is generated. In addition, factoring gives you a way to manage cash flow while eliminating the uncertainty of when invoices get paid. Whether you are a start-up company or a seasoned business, invoice factoring can help to guarantee your monthly accounts receivable.

In these uncertain economic times, many commercial businesses and residential property owners are stretching payments out longer and longer, oftentimes delaying payments owed for months. Because of this, many landscaping businesses need to quickly raise cash just to stay afloat. With predictable cash flow, landscaping businesses can reap the benefits of receiving their money as soon as the services or rendered goods are delivered. In addition, invoice factoring provides freedom from accounts receivable collections and allows the company to do what they do best… landscaping. Factoring companies specialize in the following:

• Often can fund your invoices the very next business day.
• Give your landscaping business steady and predictable cash flow.
• Give you access to working capital for your business.
• Can often work around IRS tax liens, personal credit issues or client concentration problems.

As a result of the above, landscape contractors now have a workable option when wanting to expand their company for future success. For example, commercial and residential landscaping businesses can be labor intensive which oftentimes require a need for large payrolls. As landscaping companies expand their business, so does the need for additional working capital to cover expenses such as payroll or light/heavy equipment purchases. By choosing a factoring company, landscaping businesses now have the opportunity to avoid asking for embarrassing deposits for job funding; fund all types of maintenance including government, municipal, commercial and residential landscaping jobs; pay cash for materials and supplies that are needed; and pay vendors on time improving credit standing. Now landscaping businesses can live with a sense of confidence knowing that they will have quick access to working capital.

It has been predicted that the landscape industry is expected to grow as much as 13% in the next five years. In order to manage this growth, factoring can provide these businesses an efficient way to manage their cash flow with predictable working capital. By offering immediate access to cash, invoice factoring companies provide landscaping businesses the ability to bring their ideas to life, expand their customer base, and grow their businesses into the future.

Trans Finance: A Look Into Invoice Financing

In business, the ability to manage cash is something that is mandatory if the business is to be successful. Invoice financing is a term that is used to describe the managing of cash in business. It is very important for a business which is small but has the intention of adding capital so that large business can be grown from it. It is a practical way of being financially free so that the finance that you will need for your cash flow will always be flowing. Invoice financing is something that covers different types of financial options. All of these are integrated in a way that is meant for the growth of the business.

Invoice financing covers three main areas but all have the same goal of setting the growing business free to financial freedom. Factoring of the invoice is one of the areas that are meant to help the company in the management of the business. It covers credit control, sales area as well as the ledger. The factoring part of the finance invoicing is meant to take stock of the credit while at the same time pursue those are debtors so that the cash flow will be smooth. This is one of the areas that a lot of small business neglect while they should really give it importance as it is what will lead to a better management of the resources. Invoice financing therefore comes up with ways that will help the business be in control of their credit.

Invoice Discounting is another area of invoice financing that is almost similar to factoring in that its main aim is to get the business in control of its credit. It will therefore ensure that invoice is well balanced and cleared in good time. It is one of the things that is used to restore confidence to customers on the ability of being trusted with their invoice as well as being in control of the business credits. Most of the large grown business applies this knowledge on the management of their finance and they even have departments that are meant to look into the credit control system.

Asset based lending is another area that is key in invoice financing. The ability to tally and balance the assets is very key in the management of business assets. Lending is one of the ways that is used in business to gain more funds. However, lending cannot be achieved if the assets of that the company is not even sufficient for it to run alone. Assets based lending looks into ways that the assets of the company can be increased so that enough cash can be available for the invoices that are outstanding. They look into ways of increasing property for the company, some equipment as well as the company stock or shares. They therefore come up with ways that can be used in the raising of cash.

Invoice financing is something that has been seen to work. It has not only led to the growth of businesses but also it has birthed new business opportunities. It will reduce the chance and probability of borrowing from financial institutions because of inability of funds.