Comparing Factoring Benefits - Which Invoice Factoring Company Should You Choose?

Apples to Apples – Which Invoice Factoring Company Should You Choose?

Compare key components found in factoring proposals including factoring advances and fees, client obligations and invoice factoring company benefits.

Key Components of Invoice Factoring Proposals

The key components that you will find in proposals for invoice factoring services generally come down to three things: The amount of factoring advances and fees, client obligations and factoring company benefits.

Here are some things to compare when choosing between invoice factoring services:

  • Advance Rates
  • Reserve Rates
  • Factoring Fees
  • Add-on Fees
  • Funding Options
  • Account Limits and Debtor Limits
  • Monthly Minimums or Factoring Requirements
  • Contract Length and Termination Clauses
  • Buy Back Stipulations
  • Factoring Client Obligations
  • Factoring Program Benefits – Factoring Company Promises

Invoice Advances, Reserves and Factoring Fees

Advance Rate

This is the amount (usually expressed as a percentage) of the face value of an invoice that the factoring company will fund when you factor an invoice.

Reserve Rate

The reserve is an amount (usually expressed as a percentage) of the face value of an invoice that the factoring company will hold back “in reserve” pending payment from your customer on a factored invoice.

Factoring Fee

This is the cost of factoring an invoice. Like the advance and reserve, it is often expressed as a percentage of the face value of an invoice the factoring company will retain as it’s fee when you factor an invoice.

Added together, the advance rate, reserve rate and factoring fee should equal 100%. Here is an example of their application:

  • Day 1 – Factor an invoice and get fast funding of 90% of the invoice amount, with 5% held in reserve and a 5% factoring fee.
  • Day 30+ – Receive the 5% reserve after your customer has paid the invoice (factoring company retains the other 5% as their factoring fee).

Introductory Advance Rates and Factoring Fees

Some factoring companies use low introductory rates or progressive fee structures that sound appealing, but in actuality represent a higher invoice factoring fee than many of their competitors.

Some factoring fees are flat – meaning a small percentage is the only cost of factoring an invoice regardless of how quick your customer pays the invoice. Other factoring fees might sound low but when reading the fine print you may discover fees are assessed weekly instead of monthly, or are progressive in some other way.

Because of this, a flat, one-time 5% factoring fee might ultimately be less costly to your business than a lower fee offered by a factoring company that assesses the fee weekly, especially if your customer takes several weeks or even longer to pay. Just like compounding interest, the longer the invoice remains outstanding, the higher your cost of financing will be. Given that payment terms are often 30, 60 or even 90 days, a competitive, one-time flat fee will often be far more economical than a low fee applied progressively.

To avoid increasing the cost of factoring, look for proposals where a one-time factoring fee is your “all in” cost of factoring. I.e., there are no additional costs for processing schedules, funding advances, maintaining your account, and so on.

Add-On and Hidden Fees

Some factoring companies have add-on and hidden fees that should be taken into consideration when comparing invoice factoring services; such as fees that will be charged for:

  • Schedule processing
  • Collection activities
  • Due diligence
  • Customer credit checks
  • Online account access
  • Account administration or maintenance
  • Funding fees (which may vary depending on method of funding)
  • Buy-backs / chargebacks

When reviewing a proposal for invoice factoring services, look beyond the advances and factoring rates to determine if there are add on or hidden costs that might drive up the real cost of invoice factoring, thereby reducing its benefits as a cash flow management tool.

In addition, your proposal for invoice factoring services should also outline the account limit (how much money the factoring company will have out on advances at any given time for all factored invoices) and account debtor limits (the amount the factoring company is willing to have out on advances at any given time for an individual debtor).

Factoring Client Obligations

As the factoring client, your obligations are any and all conditions you agree to fulfill in your relationship with the invoice factoring company (or the Factor). These terms may include personal guarantys, buy back stipulations (especially when factoring with full recourse), monthly minimums, contract termination and notification requirements, and monthly reports your company agrees to provide to the factoring company.

The terms which define your obligations as a factoring client could vary greatly, depending on which invoice factoring company’s services you are considering. Some of these obligations can radically impact how effective the factoring company’s program will be in helping to expedite cash flow for your organization.

Invoice Buy-Back Stipulations

Buy-back stipulations are conditions that require you to buy back an invoice previously factored. Full recourse factoring companies may require you to buy back invoices if they go unpaid for a set period of time, such as 30, 60 or 90 days, etc. They may also require you to buy back invoices if they are not paid due to credit reasons, such as insolvency of your customer. Buy-back stipulations may also require you to reimburse a factoring company for collections or legal activities undertaken in trying to recover unpaid customer payments.

Opting to factor with a non-recourse factoring company may afford your business additional financial protection. If an invoice that has been factored is not paid due to insolvency of your customer, in most cases the non-recourse factoring company will absorb the loss, not you. With non-recourse factoring, clients aren’t usually required to buy back invoices unless an invoice is disputed by the customer.

Factoring Minimums

Some factoring proposals require that you factor a minimum dollar amount or a minimum number of invoices each month, or may stipulate a higher factoring fee be charged if minimums are not met. Some proposals require that a client factors any and all invoices generated for a given client, or even that they factor all of their receivables.

Working with a factoring company that doesn’t require you to commit to factoring minimums can keep you in the driver’s seat, so that you can do what is in the best interest of your organization and factor only when you choose. We offer spot factoring and no-minimum factoring proposals so you can stay in control.

Contract Termination and Notification Clauses

If you decide to stop factoring or you have determined that the invoice factoring services offered by another company would be better for your business, some factoring contracts will require that you provide advance notification – sometimes as much as 120 days in advance.

Failure to meet the notification requirements might make it impossible for you to make a change without absorbing significant financial penalties, or you may have to wait another 8-9 months before you can stop factoring or change factoring companies.

Before signing a factoring agreement, find out what penalties or notification requirements will apply should you decide to stop factoring or take your business to a different factoring company. You may also look for a factoring company (like Corsa Finance) that doesn’t require you to sign a long-term contract or penalize you if you decide to stop factoring with us.

UCC-1 Filing

As a client, you should never sign a proposal that gives a factoring company authorization to file a UCC-1 financing statement on your business before you have been allowed to review all of the closing documents (e.g., factoring contracts) that will apply to the relationship.

Benefits to Look For in an Invoice Factoring Agreement

The benefits outlined in proposals for invoice factoring services that will be provided by the factoring company are the promises and perks that their clients will enjoy, in addition to expedited cash flow from factoring invoices.  This includes factoring advance rates but may encompass promises of good customer service, knowledgeable account managers, client online account access, reports, funding options, credit checks on customers, etc.

Since the program benefits provided by factoring companies may vary greatly, here are some of the benefits you might want to look for in a factoring agreement.

  • Fast funding on advances (ACH) – within 1-2 business days (or even faster)
  • Additional funding choices (wire funding, etc.)
  • Free credit checks to help you vet new customers or establish limits
  • Consistently high level of professional customer service
  • Dedicated account managers who understand the client’s business and preferences
  • 24 x 7 online account access
  • Transparency – no hidden fees
  • No application or account administration fees
  • No long-term contracts or monthly minimums
  • Spot factoring and micro-factoring
  • Competitive advances and factoring fees
  • Non-recourse factoring to reduce credit risk
  • Non-notification factoring to white label a seamless experience for your clients

Benefits of Working with the Best Invoice Factoring Companies

The primary reason companies factor invoices is to expedite cash flow, whether to meet expenses or grow an organization more quickly, and often both. When comparing invoice factoring services, take into account the extent to which the program seems designed to help you speed up cash flow so that you can reinvest in your organization more quickly.

  • The best factoring companies look for reasons to say “yes” when it comes to approving a client or approving an account debtor, even when it means looking past a credit score or list of assets.
  • The best factoring companies offer competitive rates and fees and have a program that is transparent, so that their clients are not hit with unexpected fees or surprises.
  • The best factoring companies leave more decisions up to the client so that they can do what is in the best interests of their organization.
  • The best factoring companies become trusted financial partners because they design their programs, operate and provide professional customer service – day in and day out – with a view for the long-term.

Get a free, no-obligation proposal for invoice factoring services or request more information about our programs by applying online, calling us at 866-855-6772 or completing the form below. We’ll listen to what’s most important to you and your business and work with you to design a factoring program that represents a good match, so you can stay focused on your business.

Don't let late payments hurt your business

Don’t Let Late Payments Hurt Your Business

Take control of your cash flow so that customers’ late payments don’t have the ability to slow or stall your business.

Is money stuck in your accounts receivable due to late payments slowing down your business?

Finance news site PYMNTS.com reports that on any given day in the US, B2B companies are sitting on as much as $3.1T (yes, TRILLION!) in accounts receivables. Larger companies have two advantages when it comes to slow-paying customers than their SMB (small and mid-size business) competitors do.

Amount tied up in unpaid customer invoices every day

  1. Relationship Power

Big companies are often the “power” player in the relationship, in the position of dictating payment terms to their customers. Conversely, SMB’s may have to play by the rules of their customers and may not feel as though they want to risk damaging a relationship by hounding a customer for payment.

  1. Financial Power

Large companies generally have deeper financial reserves than their smaller counterparts. Late payments from customers can make it difficult for small and mid-sized businesses to make payroll or meet other financial obligations, such as taxes, lease and mortgage payments, operating expenses, marketing and advertising, taking on new customers or bigger accounts, and so on.

SMBs with late payments also pay their own suppliers late

In fact, a PYMNTS study found that 28 percent of businesses impacted by late payments from their customers also then end up paying their own suppliers late.

Are you running your business or is slow cash flow calling the shots?

An Inc.com article lists signs that indicate slow cash flow is stalling or stopping business growth and operations, ultimately resulting in a lack of liquidity – insufficient on-hand working capital needed to meet payroll, expenses and other operational costs. Two of these symptoms go directly to the heart of outstanding customer invoices:

  • Late payments – overdue invoices
  • Slow collections

When money isn’t coming in as scheduled because of late payments from customers, your ability to meet payroll and cover your own business expenses is hampered. Even if you are scraping by on expenses, you may be unable to take actions to grow your business, such as taking on bigger accounts or new customers while you are waiting for customers to submit payments on jobs you have already completed.

If your business struggles – occasionally or frequently – to meet expenses or lacks working capital needed to grow, slow cash flow is negatively impacting your operations and limiting your control. You can take control of your cash flow by expediting cash flow, whether or not you eliminate the challenge of slow-paying customers.

4 Ways to Speed Up Slow B2B Cash Flow Caused by Late Payments

1. Factor invoices

You can completely eliminate the challenge of late payments by customers by factoring invoices as soon as the first day they are created by factoring them with Corsa Finance. Factoring also benefits your customers in that they can still enjoy generous payment terms and can further protect your company from risk of bad debt if you choose non-recourse factoring.

2. Offer fast-pay discounts

You probably have vendors that offer quick-pay or cash discounts, giving you a price break or account credit if you pay immediately instead of on terms. One thing to consider before offering a quick-pay discount like this to your customers is whether the discount you’re offering would be more than the cost to factor the invoice. If your factoring fee would be lower than the amount you give back in a discount, then factoring could be the smarter financial choice. Your business still gets paid right away and you aren’t leaving as much money on the table.

3. Require large deposits

One of the consequences of invoicing customers on terms after a job has been completed is that your business is often required to pay for supplies, equipment, employees and other expenses long before the revenue attached to that job has been received. If customers are required to put down a deposit, some of that revenue can be matched up to corresponding expenses. However, this doesn’t completely eliminate the issue of the balance of the invoice coming in slowly or late.

4. Invoice in real time

Use technology to generate invoices in real time as soon as a customer has signed off on a job or one of your employees has indicated its completion. Waiting a day or even a few days to invoice customers means days in addition to the length of their payment terms before revenue will come in.

What would you be able to pay for today if you weren’t waiting on customer payments or commissions owed to you?

  • Federal or state taxes
  • Taking on new clients or bigger accounts
  • Business credit card or loan payments
  • Marketing, advertising and other promotions
  • Automobile repairs, gas or maintenance
  • Lease, rent or desk fees
  • Employee or contractor wages
  • Supplies and expenses

Call 866-855-6772 or by email using the form below to find out how we can help you take control of your cash flow to keep your business on a better financial footing.

Maximize Business Cash Flow with these 10 Tips

Maximize Business Cash Flow with these 10 Tips

No matter the type or size of an organization, effectively managing business cash flow is always important, and is often a top concern.  Here are ten tips that can help you run a leaner business and maximize business cash flow, so you can grow your organization.

6 Signs You Need to Expedite Business Cash Flow

Cash flow is important to every business – so much so that one of the most commonly used financial statements for any business is called a cash flow statement. Understanding the flow of money coming into, and going out of your business can bring eye-opening revelations, especially if you are experiencing symptoms that point to inadequate cash flow; such as:

  • Scrambling to fund payroll
  • Inability to take advantage of vendor’s early-pay discounts
  • Failing to meet investor’s expectations or repayment schedules
  • Not reducing long term debt or increasing equity
  • No reserves for emergencies
  • No money to buy new equipment or fund expansion

Earlier we published an article titled Which Came First, the Chicken or the Cash Flow Problem where we talked about the ten most commonly cited reasons new businesses fail, noting both their relationship to cash flow and the warning signs that might point to problems on the horizon. With that in mind, here are ten tips that can help you maximize business cash flow so you can stretch every dollar and put it to work to help you grow your organization.

10 Tips to Help You Maximize Business Cash Flow

1. Raise prices.

If it’s been a while since you set or raised pricing, you may be surprised to find that some of your profit margins have been diminished or disappeared altogether.  Schedule a time each quarter to review pricing and profit margins in relationship to not only current expenses, but long-range plans and the competitive marketplace.

2. Improve upgrade and add-on sales.

You’ve landed a new customer – now what? Before you finalize a contract or sale to a new customer, make sure you aren’t leaving money on the table in the form of upgrades, additional services, expediting or add-on sales that could give you a bigger return on the cost of customer acquisition.

3. Cut costs.

No matter how lean your business operations are, over time there will always be new ways to cut costs and eliminate waste. Along with scheduling a regular review of pricing or profit margins, set aside time on a regular basis to review line item expenses and look for those which are no longer needed.

4. Incentivize innovation.

This is a perfect example of a time when you should spend money to make money. Enlisting staff in coming up with ways to improve your business, cut costs, become more efficient and eliminate waste is a great investment for the long term.

5. Speed up collections.

Yes, you can speed up collections (and expedite cash flow) by putting the pressure on your customers or setting up quick-pay discounts; but you can also get immediate access to unpaid customer invoices by factoring them with a factoring company like Corsa Finance.

The minimal cost of invoice factoring (as low as 5% of an invoice amount for small invoices and less for larger balances) can often be more than offset by the competitive advantage you gain when you can extend longer payment terms to your own customers.  Factoring fees can also be more than offset when expedited cash flow means that you can take advantage of vendor and supplier’s early pay discounts yourself.

We would be happy to help you discover whether factoring would represent an overall cash flow gain for your business – at no cost to you. Use the form below to request a free, no-obligation factoring quote; you could go from approval to your first funding in hours, instantly expediting business cash flow.

Request a no-cost, no-obligation quote:

6. Take advantage of industry discounts and offers.

From group buying discounts to industry or networking group offers, there could be many opportunities for you to get more from every dollar you spend.  Sometimes the only investment that you will need to make to take advantage of these offers and discounts is time!

7. Eliminate petty cash.

Once upon a time it was smart for business owners to keep a little – or even a lot – of cash on-site for emergency use or to fund incidentals.  The problem with petty cash is that keeping track of what the money was used for or removing the temptation to dip into it unnecessarily can be difficult.  If maximizing cash flow is your goal, make sure that you can account for every dollar that is leaving your business.

8. Negotiate.

Some people have a natural talent for negotiating. For the rest of us, it must become a learned skill. Failing to negotiate (or at least find out whether there is room to negotiate) with vendors, investors, customers, lenders, landlords and other entities that impact your business cash flow – in-coming or out-going – will nearly always mean that you spent money unnecessarily or did not receive as much money as you could have earned.

9. Audit.

It’s easy to set it and forget it when it comes to vendors and suppliers. Make sure you have a time established, especially before auto-renewals or in the case of perpetual agreements where you will review terms, renegotiate, and compare other options.

10. Flex your muscles!

Cash flow represents buying power and leverage.  Make sure you ask vendors and suppliers for early-pay discounts and take advantage of all that exist. Remember that factoring invoices can speed up cash flow, which could give you the ability to negotiate lower prices and reduce your expenses. These discounts may not show up on your cash flow statement or any other financial statements, but that doesn’t mean they won’t add up quickly.

8 Ways Invoice Factoring Can Help You Grow Your Business Faster

8 Ways Invoice Factoring Can Help You Grow Your Business Faster

Is lack of working capital a problem? Grow your business faster with a financing tool that speeds up cash flow.

Business Cash Flow Financing – 8 Benefits of Invoice Factoring

Few things are more frustrating in business than watching opportunities pass you by because of a lack of working capital. In fact, lack of working capital is repeatedly cited as one of the main problems business owners face when trying to grow their business – or even just keep it afloat.

Having your organization’s growth constrained by a lack of working capital can be especially frustrating when you have assets you can’t access, such as outstanding receivables, and you find yourself waiting for customers to pay so you can take on new business. If a lack of working capital is keeping your business from growing or cash flow is a problem, invoice factoring could be an ideal cash flow financing tool for your organization.

8 Ways Invoice Factoring Can Help You Grow Your Business Faster

You can access the working capital locked up in outstanding invoices by factoring invoices instead of chasing customer payments. Having this working capital in hand, instead of on the books, could be the ideal business financing tool to enable you to:

  • Take on new business more quickly
  • Service larger customers
  • Purchase additional equipment, facilities or real estate needed to grow, expand or hire additional employees
  • Repair or replace aging or deficient assets
  • Improve cash flow to maintain a more even, predictable flow of money to meet operational expenses and fund payroll
  • Engage in strategic marketing and business growth initiatives
  • Negotiate discounts from your own suppliers or vendors
  • Extend more favorable terms to your customers to gain an edge over the competition

Our financing tools are especially appropriate for organizations that want to grow but find that cash flow is not keeping pace with operational needs. Low cash flow often creates difficulty in taking on new projects, new customers or larger accounts not because they aren’t profitable – but simply due to lack of working capital. Factoring can be used as a financing tool to unlock working capital that would otherwise be tied up in customer invoices for weeks, or even months.

Use our invoice factoring calculator to estimate the amount of working capital you could unlock by factoring unpaid customer invoices:

Our team has years of experience in factoring for a variety of industries, and now we are putting that experience to work helping our clients get tailored invoice factoring agreements, so they can maximize the benefits of this business financing tool.

We invite you tap our expertise. We will work with you to come up with a flexible plan that is customized to the financial needs of your business and the way you do business. Here are some of the advantages of factoring with Corsa Finance:

  • No long-term contracts or factoring minimums – factor only when you want to, and only those invoices you choose
  • No application, due diligence or credit check fees
  • No notification, funding or reserve release fees
  • Free funding on advances as soon as the same or next business day
  • Competitive advance rates – as high as 90 percent
  • Competitive factoring fees – factoring fees as low as 5 percent for small invoices or lower for larger balances
  • Choose full recourse, white-labeled non-notification factoring, or non-recourse factoring with additional financial protections
  • Flexible options – retain control of your own accounts receivables billing or let us do the work
  • High level of customer service to you and your customers – we want to earn your business and referrals!

When you think about all of the ways you could be growing your business if only you had access to the money locked up in customer invoices, the idea of using a financing tool that can expedite cash flow becomes even more compelling. We invite you to apply for a free, no-obligation invoice factoring proposal (even if you’re already working with another factoring company and just want to compare).

 

7 Ways to Speed Up Business Cash Flow

7 Ways to Speed Up Business Cash Flow

Waiting on customer payments? Leverage these ideas to speed up business cash flow so you can focus on growing your business, instead.

STUDY – 3 Out of 10 US Businesses Not Paid On Time

According to the 2018 Global Trade Credit Payments Study by Dun & Bradstreet, U.S. companies in many industries are not being paid on time. While nearly 7 in ten financial services invoices are paid by the due date, as few as 38 percent of manufacturing invoices are paid on time.

Average time businesses wait to get paid

The Financial Services industry wins again when it comes to the fewest number of invoices that go beyond 90 plus days late before getting paid. Retail Trade, Construction and Transportation and Distribution industries have the most invoices that remain unpaid three months past their due date.

Retail Trade, Construction and Transportation and Distribution industries have the most invoices that remain unpaid three months past their due date.

Whether your business falls into one of these categories or a different one, every business that invoices customers or waits on third party payments (like app developers and merchants selling on Amazon, Zulily, Poshmark and similar platforms) experiences some kind of opportunity cost while waiting to see these on-the-books receivables turn into working capital.

The Opportunity Cost of Slow Business Cash Flow

Yes, sitting around waiting on customers to pay accounts receivable invoices or for third parties to pay out your commissions and sales revenues does have a name: Opportunity cost. It’s the sum total of anything you couldn’t do because you had working capital owing on the books instead of in hand; such as:

  • Waiting to replenish inventories or supplies
  • Limiting marketing and advertising funds
  • Stressing your ability to meet payroll or expenses
  • Precluding you from getting quick-pay discounts from your suppliers or vendors
  • Preventing you from expanding, taking on bigger customers or new orders
  • Watching competitors take advantage of emerging opportunities while you wait on the sidelines

Working capital is opportunity! Let’s talk about some of the ways you can speed up business cash flow so that opportunity cost doesn’t slow your organization down or keep it from growing as quickly as it might have otherwise.

Speed Up Business Cash Flow with 7 Proven Tactics

1. Restrict Customer Payment Terms

So this might seem a bit obvious, but one way to get customers to pay faster is to reduce the number of days customers have to pay. This won’t work in every case and of course doesn’t apply if you wait on payments from platforms like Amazon, Zulily, Poshmark, mobile apps, etc., because the platforms have non-negotiable terms. It could also be perceived negatively in terms of competitive advantage, causing customers to turn to businesses that extend more generous payment terms instead.

2. Factor Receivables

We help speed up business cash flow every day, every time we forward an advance on an invoice factored by one of our clients.  It works like this:

An organization or entrepreneur that sells products or services on terms to customers (or via third party retail or e-commerce platforms) factors – or sells – that invoice to us for a small fee (called a factoring fee). Within 1-2 business days, that organization receives an advance on the invoice (or promised payment) of up to 93 percent.

The invoice can be factored as early as the same day the customer invoice is generated (or the third party platform statement is received), so instead of waiting weeks or months on payment, the organization can completely eliminate opportunity cost and stay focused on growth. This enables organizations and entrepreneurs to:

  • Better align expenses with corresponding revenues
  • Meet payroll and operating expenses more readily
  • Access working capital needed to capitalize on fast-emerging opportunities
  • Increase inventories or supplies to take on more orders or serve larger customers
  • Negotiate fast-pay discounts with suppliers to save money on operating expenses
  • Reinvest in the organization more quickly (operations, staffing, marketing, advertising etc.)

3. Provide More Payment Channels

Waiting on customers to send payments via U.S. Mail can add days or even more than a week onto your wait. By adding more payment channels including online pay capabilities you make it possible for customers to choose the payment method that is most convenient for them. In addition, emailing invoices to customers instead of mailing them by postal service may cut additional days off your wait time.

4. Communicate Frequently

Staying in touch with your customers keeps your business top-of-mind and can passively remind them that they should send payment to you. Nor does communication need to be about the customer’s invoice, although this may be a necessity with slow-paying customers. You can stay top-of-mind with customers by sending occasional email newsletters, updates, special offers or expert advice, thereby adding value to the relationship as well.

5. Think Lean

If you overstock inventories or supplies, then your money could be sitting on the shelf instead of at your disposal. Pay close attention to customer preferences, buying cycles, patterns and seasonal trends to see where you may be tying up working capital on slow-moving products or services.

6. Create a Formal Process

What kind of plan do you have in place to communicate with slow-paying customers? Creating a formal process – almost like an email drip campaign – can remind and encourage customers whose payments are late to bring their account up to date.

7. Extend Quick-Pay Incentives

Giving customers some type of incentive to pay you ahead of schedule may speed up your business cash flow. These incentives need not be quick-pay discounts, although that is a commonly used tactic. If you are going to extend discounts, be sure that to examine how they will affect your organization’s overall profitability. You may find that the fee for factoring invoices is far less than the amount of customer discount it would take to incentivize early payment.

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12 Ways to Protect Yourself and Your Business from Internet Scams

12 Ways to Protect Yourself and Your Business from Internet Scams

Even before personal tech devices – and internet scams – became commonplace, scammers existed. They used the postal service and wall-mounted telephones to scam people out of money and identities. Sometimes they succeeded.

Internet Scams, Spam and Phishing – Oh My!

As technology advanced, along came the internet scams. Now they use email, SMS (text) messaging and mobile phones to try to get access to identities, bank accounts or to persuade their victims to send money.

If you have a mobile device, if you get email, if you purchase things online, or even if you just do business with companies that store information in the cloud, you are unfortunately at risk in some way.

Think about all of the stories you have seen recently about a large retailer or financial institution whose customer data was breached. Even social media use can put you at risk, as scammers often impersonate accounts by creating a “mirror” account using the images and text of another or posing as someone in order to interact with potential targets.

12 Ways to Protect Yourself and Your Business from Internet Scams

There are some basic ways you can protect yourself and your organization from internet fraud, and you can also learn to spot red flags that may indicate someone is trying to scam you. The FBI’s website has many great resources for this, including a list of recent email scams and warnings. They estimate email scams alone cost over $26 Billion in 2019!

  1. Refrain from giving personal or financial information out to incoming sources. Your bank is never going to email you and ask you to verify your account information – they already have it!
  2. Check the sender information. Email scams often come to you as though they are being sent by a friend, retailer, bank, or some other entity you do business with. However, when you look closely at the actual return email address, the address isn’t a match to the organization. The URL/domain names are different.
  3. Verify, verify, verify! One common email and telephone scam is to contact someone pretending to be a colleague or loved one who has an emergent financial need. Before sending money or giving out account information, get in touch with the actual person (colleague or loved one) or someone who knows them well and can verify the need is legitimate.
  4. Ask for a call back number and see if it matches publicly available information for the organization.
  5. Google some of the terminology, sender information, subject line, company name, etc., from the email to see if it matches up to known scams.
  6. If the communication contains some kind of threat, such as a threat to shut down your network, request for ransom for your domain name or if your website gets hacked, or a personal threat, contact local or federal law enforcement, your web hosting provider, your lawyer, etc., to see how to proceed.
  7. Protect your website with a firewall, antivirus, anti-spyware/malware and anti-spam software, and an SSL certificate that encrypts the data submitted to you via the forms on your website. With all of this security comes updates, so be sure to update your software on a regular basis.
  8. Shut it down! Shut down your computer when it’s not in use to prevent attacks from happening and/or stop any attack in process.
  9. Download with care. Many forms of malware are sent via email and if you click on a link or download a file from the internet, you may be unwittingly installing malware or spyware that can make your business vulnerable to attacks, ransomware or a data breach.
  10. Don’t click. You might think you’re closing a malicious popup only to find that the “X” you clicked on to close the box started an action instead. Instead of clicking to close a pop-up window or ad, close the browser window instead.
  11. Clear your devices’ cache, cookies and history. Clear out any unwanted internet activity by clearing your devices cache, which are temporary files stored on a device to make loading re-visited websites more efficient. You can also clear your devices internet browsing history and delete cookies to free up space on your device. This type of device “housekeeping” can make your devices run faster, frees up memory, and helps keep your device safer in the process. If you’re unsure about how to do this, contact your IT department, a local IT (information technology) or computer repair/maintenance specialist, or google information about how to do these types of tasks on device’s operating system.
  1. Institute protocols. Make training about internet fraud part of your employee orientation and on-going training. Institute protocols and rules for use of company devices on the internet (including for email).

What – Exactly – Are Scams, Spam and Phishing?

Here are some of the common terms it’s important to understand, in order to protect yourself and your organization.

Scams – Internet Fraud

The FBI defines internet fraud as “the use of Internet services or software with Internet access to defraud victims or to otherwise take advantage of them. Internet crime schemes steal millions of dollars each year from victims and continue to plague the Internet through various methods.” It describes several types of internet scams including:

  • Business Email Compromise (BEC) wherein legitimate business email accounts are compromised “through social engineering or computer intrusion techniques” in order to conduct an unauthorized transaction of funds
  • Data Breach – Unauthorized access (copying, transmitting, viewing) to business data which might include customer accounts, employee information, bank or financial information, etc.
  • Denial of Service – When a hacker is able to interrupt access to any system or network, such as when a website gets “hi-jacked” or rerouted to another URL, users are unable to login to systems, network access is cut off, etc.
  • Email Account Compromise (EAC) which is similar to BEC but may also extend to the general public, and in which compromised or impersonated email accounts are used to solicit funds from victims
  • Malware – Malicious software, codes, scripts, etc., used to disable or damage computers, networks or other devices
  • Scareware – Similar to malware but includes the use of scare tactics to get victims to click on something, send funds or take some other action
  • Phishing, a.k.a. “Spoofing” refers to use of forged or faked electronic documents. Spoofing is when an email is disguised to appear as though it’s coming from a legitimate source (such as a financial institution or brand) rather than its actual source (also referred to as vishing, smishing or pharming). In both cases, the intent is usually to get the victim to provide personal or sensitive information like passwords, credit card information, bank account numbers or to redirect the victim to a malicious website.

And finally

  • Ransomware – A form of malware and/or phishing or email compromise in which money is demanded in order to restore access to data, a network, or even suggesting the recipient has committed crimes or done something else (e.g., “we caught you doing ___________ and we’re going to release this information if you don’t pay!”)

Internet fraud schemes frequently occur as investment schemes, the infamous Nigerian prince letter fraud, non-delivery of merchandise, internet auctions, business or credit card fraud.

If you believe you or your business has been the victim of one of these schemes, you should report it to your financial institution, any organization that the scammer was posing as (such as when they pose as your bank, a retail store, a charity, or some other organization), and you can also report internet fraud directly to the FBI to assist in their efforts to discover and prevent these types of costly and malicious crimes. If you haven’t been victimized per se but want to report a tip about internet fraud to the FBI, you can do that as well.

You might also like: Understanding Common Business Financial Statements

Overview of Common Business Financial Statements

Understanding Common Business Financial Statements

Improve your ability to understand and interpret the most common business financial statements needed to run your organization.

Financial Literacy is Essential for Running a Thriving Business

PreferredCFO.com cites several business finance challenges being at the heart of why young businesses failed, with financial literacy coming in on the top of the list:

  • 82% – Didn’t understand cash flow or had poor cash flow management skills
  • 79% – Didn’t have adequate working capital at the outset
  • 78% – Didn’t have an effective or well-developed business plan
  • 77% – Didn’t price products or services properly
  • 73% – Didn’t predict sales or costs accurately
  • 70% – Didn’t know what to do to succeed and failed to seek help from those who did

It’s nearly impossible to overstate the importance of financial literacy. While a business owner can learn along the way, having a strong understanding of the financial needs and performance of their company can help them avoid making some of the costly mistakes that can hurt an organization.

This need only grows over time, from knowing how much money you need to start up, to understanding when it’s time to make changes in your business. Paying close attention to the common business financial statements produced each month, quarter or year can give you invaluable insights into sales trends, vendor costs, payroll and other business expenses so that you can take action before a small problem escalates.

Overview of Common Business Financial Statements

What is a Balance Sheet?

The balance sheet shows an organization’s assets, liabilities and net worth. The organization’s assets must be equal to the sum of its liabilities (debts) plus equity in order to balance.

Assets are items an organization owns that have value; meaning, they can be sold or leveraged to make services or products which can be sold.

Liabilities are debts owed by the business to another organization or individual.

Net worth, or equity, is what an organization would have if all assets were sold and all liabilities satisfied. An organization’s net worth belongs to its owner and/or any and all shareholders.

What is an Income Statement?

The income statement shows how much revenue, or income, an organization earned over a specific time period (often over a quarter or year). And it also shows the costs and expenses attributed to earning that revenue.

The commonly used phrase, “the bottom line…” is derived from the actual bottom line of the income statement because it shows an organization’s net income or net loss after costs and expenses are deducted.

What is a Cash Flow Statement?

While income statements have a bottom line of net earnings or loss for a given period, cash flow statements show the movement of cash in and out of an organization.

Understanding the flow of cash going in and out of your business is important because you need to know whether you have enough money coming in to cover operating and capital expenses. It can also help show you where your cash is coming from (or whether activities, such as operating activities) are not generating enough cash to cover operating expenses.

So what if you do have slow cash flow? Apart from growing your business or increasing sales, another way to speed up cash flow is to factor customer invoices instead of chasing down payments. Some companies do this on an on-going basis until they have grown to the point that incoming revenue from sales more than cover business expenses. Other companies choose to factor invoices only occasionally or to spot-factor invoices in order to free up working capital to meet payroll, invest in emerging growth opportunities, pay vendors more quickly for fast-pay discounts, and so on.

The more you understand your organization’s cash flow, the better you can leverage financial tools that expedite working capital. This can help you run your business more effectively and efficiently, or put you in a position to grow your company faster.

Why Understanding Common Business Financial Statements is Important

In business, chances are that sooner or later you will need to be able to read and interpret common financial statements in order to make good business decisions for your organization and avoid costly mistakes.

A better understanding of the financial position of your business can help you determine whether, and how, business financing options like invoice factoring could provide you with expedited working capital or a more consistent flow of cash so that you can focus on growing your business to the next level.