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.

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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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The Benefits of Non-Recourse Factoring

What is Non-Recourse Factoring?

When an organization is considering expediting their cash flow through accounts receivable factoring it is important for that organization to understand the value that is provided by choosing to work with a non-recourse factoring company.

Comparing non-recourse factoring to factoring with full recourse shows some of the benefits of choosing a non-recourse factoring company.

Beyond Factoring Fees and Advances – The Benefits of Non-Recourse Factoring

When a business is comparing quotes for factoring services, they are often solely focused on the fee that will be charged or the advance rate they will receive on factored invoices. But fees and advances are just the tip of the iceberg. Astute business owners will also look at the additional benefits provided to them by choosing to work with a non-recourse factoring company in order to reduce – or even eliminate – their financial risk from bad debt.

First, an invoice factoring (a.k.a. receivables factoring) primer. Invoice factoring is a finance tool that can be used by organizations that invoice business customers upon delivery of goods or completion of services.

When an organization (called a “factoring client”) factors an invoice, they sell it to a factoring company, or “Factor”. The Factor that buys the invoice provides the factoring client with an advance on the invoice (we offer fast funding on advances as high as 90 percent of the face value of the invoice) for a small fee (our factoring fees start at 5 percent).

Using invoice factoring, your organization gains immediate access to cash flow that might otherwise be tied up in a customer invoice for weeks – or even months. With improved cash flow, you can take on new business more quickly and ensure that money will be on hand to meet operating expenses.

There are other benefits to factoring invoices as well. Organizations that choose to factor invoices might do so for a variety of reasons; such as:

  • speeding up cash flow in order to take on new business more quickly
  • maintaining more consistent cash flow in order to meet expenses more easily
  • reducing costs (payroll, supplies, mailing, etc.) attributable to receivables activities, including collections costs
  • eliminating cash flow challenges caused by slow-paying customers
  • extending longer payment terms to customers as a competitive advantage
  • or to resolve other common cash flow challenges

Comparing Non-Recourse Factoring to Recourse Factoring

As it pertains to a factoring company, the word “recourse” references the extent to which the factoring company is willing to assume risk of non-payment on factored invoices.

Recourse factoring companies fund advances on invoices with the understanding that the organization will be obligated to buy them back if they go uncollected (for any reason). If an invoice remains unpaid for a certain period of time, the factoring client may be required to buy it back and may also be obligated to compensate the factoring company for administrative and collections costs incurred while trying to collect payment from the organization’s customer. Reduced financial risk for the factoring company sometimes means factoring with recourse offers lower rates, but not always.

Non-recourse factoring companies assume more financial risk from bad debt than those that factor with recourse. When a non-recourse factoring company buys an invoice, the Factor assumes the credit risk. If the factoring client’s customer is unable to pay due to insolvency and other credit-related risks, the non-recourse factor assumes the financial loss.

Organizations that factor invoices with a non-recourse factoring company can reduce, or even eliminate, their financial risk from bad debt, since the non-recourse factor assumes the credit risk. Generally, the only time a factoring client would be required to buy back an invoice from a non-recourse factoring company would be in a case where the invoice itself is in dispute, such as when an order has been returned for some reason.

How the Factoring Process Works with Non-Recourse Factoring Companies

Working with a non-recourse factoring company is important to many of our clients. They use factoring services to free up working capital in order to operate more efficiently and grow more quickly. But they also enjoy the peace of mind of knowing that, once an invoice has been factored, they no longer need to worry about financial risk from bad debt, performing collections activities or even invoicing the customer, depending on their factoring agreement.

Get a Free Quote for Non-Recourse Factoring

We would be happy to answer any questions you might have about invoice factoring with a non-recourse factor or provide you with a no-risk, free, no-obligation quote for non-recourse factoring services so that you can determine whether this type of finance tool would benefit your organization.

Ready to apply? Complete a one-page application online or request more information about non-recourse factoring using the form using the form below.

The Hidden Costs of Invoice Factoring

The Hidden Costs of Invoice Factoring

Six hidden costs of invoice factoring could make factoring invoices more expensive and less beneficial as a cash flow management tool.

6 Hidden Costs of Invoice Factoring Reduce Benefits and Drive Up Cost

When comparing the invoice factoring proposals of U.S. factoring companies, remember to look for additional costs and add-on fees in addition to the factoring fee that is being offered.

These fees and charges may seem small but when you do the math you can clearly see that they quickly eat into your business’ profits and jack up the real cost of invoice factoring.

1. Add-On or Administration Fees

Though it seems like administrative services should be part of the service provided, some invoice factoring companies tack on extra fees for the administrative tasks that are part of the invoice factoring process.

Any add-on cost drives up the real cost of invoice factoring. Some of the other hidden fees factoring companies might tack on include things like:

  • Application fees
  • Proposal fees
  • Due diligence fees
  • Credit check fees
  • Notification fees
  • Schedule processing fees
  • Invoice processing fees

We don’t charge any application, due diligence, credit check or account set up fees that drive up the cost of factoring. Nor do we assess extra fees to process paperwork, transfer funds or notify you of account actions. We view these types of tasks as intrinsic to the invoice factoring process, not as add-ons.

2. Long Term Contracts

Some factoring companies require clients to sign long-term contracts that might range from 6, 12, or even 24 months, and harbor strict renewal and notification clauses. If a client doesn’t adhere to the contract’s conditions or needs to be released from the contract before the terms are up, significant penalties are often assessed.

We don’t require clients to sign long-term factoring agreements, so they aren’t locked into an agreement that may no longer be right for their business. We believe the best factoring companies earn their clients’ continued patronage through professional customer service and outstanding performance, not long-term contracts with stiff penalty clauses for leaving.

3. Monthly Minimums or Other Minimum Factoring Requirements

Some factoring companies require clients to commit to factoring a minimum number or dollar amount of invoices every month or every quarter. If they fail to meet these minimums a penalty fee is assessed. Being locked in to factoring minimums may not be what is best for an organization. Factoring is a financing tool meant to help an organization grow more quickly, but mandated factoring isn’t always what’s best for a business. We don’t require clients to commit to factoring minimums. They have the freedom to factor only when it’s best for their business.

4. Introductory Rates, Fees or Other Conditions

Some factoring companies offer low introductory rates to new clients, then down the line they lower advance rates and raise factoring fees, quickly wiping out any savings enjoyed during the introductory period. In other cases, factoring companies offer what sounds like a low fee, but fine print reveals the fee is applied weekly or progressively, which then also costs the client more. We value transparency and simplicity. As our client, you will know what your advance rate and factoring fees will be from the outset, so you can make financial decisions in the best interests of your organization.

5. Lost Customers

When an organization factors invoices, the relationships they have with their customers may also be impacted by the factoring company they chose to do business with. A factoring company that engages in strong-arm collections tactics or pressures customers to pay more quickly could result in lost customers for a business. We view factoring as a tool our clients can use to grow their business and we want clients to use our services for as long as it benefits their bottom line. This view to the long term means we extend a high level of professional, courteous customer service to our clients’ customers as well.

Another way we help improve cash flow without jeopardizing customer relationships is through non-notification factoring. With non-notification factoring, the customer may never know an company is utilizing invoice factoring because the process is white-labeled to the organization almost completely, providing a seamless customer experience.

6. Recourse Factoring Buy-Back Stipulations

Most U.S. factoring companies factor invoices with recourse. Organizations that factor with full-recourse may be required to buy back an invoice at its full face value if a customer does not pay within a given period of time, if the customer cannot pay due to insolvency or for any other reason.

We do offer full-recourse factoring, but we also offer non-recourse factoring services that help minimize the organization’s risk from bad debt. With non-recourse factoring, we assume the credit risk for the invoices factored by an organization, and (in most cases) absorb the loss if a customer is unable to pay.

Eliminate the Hidden Costs of Invoice Factoring

Transparency with our customers is one of our guiding values. We are proud to offer receivables financing that is free of the hidden costs of invoice factoring, including the add-on costs some other factoring companies use to produce additional revenues. Ideally, your factoring fee will be your “all in” cost of financing.

Since it is likely your intention to utilize invoice factoring to speed up the incoming cash flow from invoices currently on your books (and thus get that working capital back into your business more quickly) it stands to reason you should compare the advance amounts and factoring fees offered by factoring companies (or Factors). As an educated, astute shopper of these services, you should never sign on the dotted line until you know exactly how the program works, all the fees that may apply, and how factoring your invoices could impact your profitability.

If you have questions about your factoring contract, want a quote for comparison or would like to find out more about our services, request a quote. We will be happy to provide you with a factoring proposal which you can compare against your current agreement.

Which Came First - The Chicken or the Cash Flow Problems

Which Came First – The Chicken or the Cash Flow Problems

Whether or not you deploy invoice factoring or other financing tools to resolve cash flow problems, drill down to the root of the problem to prevent it from impacting your growth again in the future.

Cause or Effect? Exploring the Relationship of Common Business Challenges and Cash Flow Problems

“Access to capital” is commonly cited among the top cash flow problems for small business owners and startups, in particular. But often low cash flow is a symptom, not the cause.

We just published an article which listed the top ten reasons B2B startups fail – or fail to thrive – during their early years of existence. While “access to working capital” was not specifically listed among the reasons, many of the reasons that these small businesses failed tie back to cash flow problems in some way. So much so that someone on LinkedIn asked why “access to capital” was not on the list:

“Good info to share. I have read several articles that say the #2 reason for failure is the lack of revenue / cash flow / financing.”

Is inadequate cash flow the cause or just the symptom when things are going sideways in a B2B startup or young business? It’s sort of a “which came first, the chicken, or the egg?” type of question. It’s easy to point to lack of working capital or slow cash flow as the problem, when actually, cash flow problems are the result of another issue whose roots lie elsewhere.

Here’s another look at the list we shared, along with an analysis of what symptoms might be present within a business experiencing the same type of challenge, along with steps you can take to address the challenge if you discover it in your organization.

More than Cash Flow Problems: Warning Signs of the Top 10 Challenges that Derail Startups and Small Businesses

Emotional Pricing and No Understanding of Pricing (#1 and #4 on the list)

If goods or services aren’t priced high enough to produce the margins needed for a business to be profitable, it can quickly result in low cash flow. Conversely, if products are priced too high it can result in inadequate volume of sales needed to produce the revenues required to meet operational needs (and result in low cash flow).

You may be able to fix your pricing strategy by conducting some competitive research or establishing a value proposition that resonates with more buyers. You may also need to determine whether there is an adequate number of buyers in your target markets to support a particular product or service; if the market is inadequate, it might be necessary to scrap or table the item for the time being.

Living Too Large (#2 on the list)

Many entrepreneurs become small business owners out of a desire to build a better life for themselves, and it’s understandable that they (or their investors) would want to enjoy the fruit of their labor. Low cash flow can be symptomatic of the removal of too much operating revenue by an owner or investors. This challenge can be addressed through proper financial planning and having controls in place (or the self-discipline required) to ensure that the business retains the revenues it needs for day to day operations and growth initiatives.

Not Paying Taxes and No Experience in Record-Keeping (#3 and #7 on the list)

Many tax preparation professionals have a number of clients who are also sole proprietors and small business owners, and nearly all could probably tell you a story about doing taxes for a small business owner who had failed to set aside money for state or federal taxes. Not paying taxes at all, or not paying enough in taxes is a sure-fire way to hurt a small business.

We have included lack of experience in record-keeping here as well because both non-payment of taxes and poor record keeping are related; and both can find fixes in working with a professional accountant or bookkeeper in order to ensure that the paperwork is done right and taxes are filed and paid on time.

Both can also result in low cash flow; and in particular, as you work through your pricing strategy, it’s important to include projected tax expenses as you calculate margins and set prices for your goods or services.

Lack of Planning (#5 on the list)

Lack of planning can negatively impact any number of areas within a small business. Lack of planning could result in stocking too much or too little inventory. Lack of planning could result in having too many staff on board or not enough personnel. Some small business owners are inherent planners, others are more inclined to be visionaries. Some see the big picture, others the details.

One important thing for any business leader to remember is that it’s rare for any one person to have all the skills, abilities and inclinations needed to do everything that needs to get done in the business – and do it all well. This challenge can be addressed by hiring to your inadequacies, finding good mentors and recognizing where you need help (instead of trying to do everything yourself).

The bottom line: If planning in many or even just one vital area of your business is not your strong suit, don’t be afraid to ask for help.

No Understanding of Financing and Inadequate Borrowing (#6 and #10 on the list)

Meeting with a business finance expert as you launch your organization and as you grow can help to ensure that your finances will be correctly set up and understandable. Clarity in this area can help you identify problems as they emerge, before they hurt your business, and while there is still time to act to resolve them.

Additionally, it’s important for small business owners and entrepreneurs to understand that there are financing alternatives available that can help resolve common cash flow challenges. For instance, we offer business financing programs that can help small businesses with low or slow cash flow, including receivables invoice factoring that allows an organization to “speed up” collection of customer invoices in order to create more consistent cash flow and take on new business more quickly.

Poor Credit Granting Practices (#8 on the list)

As with setting prices, organizations can make the mistake of extending terms that are too generous, thus affecting cash flow because customers take a long time to pay or they can make the mistake of setting customer terms that are not generous enough, so that competitors look more attractive to their customers.

The good news for companies that invoice their customers after delivering goods or performing services is that invoice factoring can alleviate this challenge altogether. When companies factor invoices, they can receive payment on a customer’s invoice the same day the invoice is generated, without waiting for customers to pay.

Expanding Too Fast (#9 on the list)

When organizations try to expand too quickly, they often deplete resources (including working capital) to the point that the business may have trouble meeting operating expenses. This is another instance where simply working with a financial planning expert and creating a manageable, controlled plan for growth can prevent the problem from occurring.

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Get more information about how invoice factoring can speed up B2B organizational cash flow:

Top 10 Reasons B2B Startups Might Fail

Top 10 Reasons B2B Startups Might Fail

There is as much to be learned from failures as there is from success. Find out the most common reasons why B2B startups might fail during the first five years.

10 Areas Where Incompetence and Inexperience Can Cause B2B Startups to Fail

From cash flow to customer terms, unless you’ve run a business before, what you don’t know might hurt your new business. Find out how to protect and strengthen your startup or young business by shoring up knowledge and expertise in these ten areas that account for 75 percent of all young business startup failures.

Unless you have launched a startup or small business of your own, it is hard to describe the feeling of excitement and limitless opportunities that startup owners experience when they first open their doors (whether brick and mortar or virtual.) Equally difficult to describe is the vast disappointment that same small business owner will experience if they are forced to close those doors permanently within a few years (or even months) because their young business is no longer viable.

As alarming as it sounds to say that half of all startups are no longer in business by the five-year mark, it’s not like the five-year mark is magic. In fact, more than seven out of every ten startups will fail within the first ten years. (statisticbrain.com)

The industries with the highest failure rates by year four (when 50 percent of all new young business startups are said to have failed) include:

  • Information – only 37% still in business after 4 years
  • Transportation / Communication / Utilities – only 45% are still in business after 4 years
  • Retail – only 47% are still in business after 4 years
  • Construction – only 47% are still in business after 4 years
  • Manufacturing – only 49% are still in business after 4 years

On the flip side, the industries which have the higher success rates by year four are listed as follows:

  • 58% of Finance / Insurance / Real Estate organizations are still operating after year 4
  • 56% of Education / Health organizations are still operating after year 4
  • 56% of Agriculture organizations are still operating after year 4
  • 55% of Services organizations are still operating after year 4
  • 54% of Wholesale organizations are still operating after year 4

From Startup to Young Business to Out of Business, Top 10 Reasons B2B Startups Might Fail

Statisticbrain.com listed the top ten reasons that a young business might fail under two main categories: incompetence and inexperience. One could make the argument that incompetence occurs largely due to inexperience or lack of knowledge needed to put the right policies into place; but for now let’s stick with their categories and talk a little bit about the most common reasons that startups tend to fail within the first five years.

Top 10 Reasons Startups Fail

Incompetence accounts for 46 percent of small business failures within the first ten years of operation. The specific areas of incompetence that derailed these startups included:

  • emotional pricing
  • living too large
  • not paying taxes
  • no understanding of pricing
  • lack of planning
  • no understanding of financing
  • no experience in record-keeping

As you read through the list, it’s easy to conclude that many of these small business failures could have been prevented if the entrepreneurs had educated themselves in the areas of finance, taxes, record keeping and pricing. What’s more, the problems that result in all seven of these areas directly affect cash flow, which is the lifeblood of any business, of any size.

Inexperience accounts for 30 percent of small business failures occurring within the first ten years of operation. The three specific areas where lack of knowledge and experience resulted in startup failure were:

  • poor credit granting practices (lack of experience in setting the right customer terms)
  • expanding too fast
  • inadequate borrowing

Even more than the previous reasons cited for startup failure within the first decade, these three reasons point back to an inadequate understanding of cash flow management, which, in turn, is just about certain to result in inadequate cash flow needed to sustain a small business.

Cash flow is simply the movement of money into and out of your business. Positive cash flow results when revenues exceed expenses; conversely, negative cash flow occurs when money is going out of a business more rapidly than revenue is coming in. Inc.com lists five ways to improve cash flow (collecting receivables, tightening credit requirements, increasing sales, discounting for early payment and obtaining financing).

However, it’s not always possible to implement some of these suggestions. For instance, if extended customer credit terms are being employed as a competitive advantage, it may not be possible – or even advisable – to demand that customers pay up more quickly.

How to Speed Up B2B Business Cash Flow

Any of the reasons cited for the demise of 76 percent of the small businesses that failed in their first ten years could have been experienced by any type of B2B (business to business) organization. Though some could have been prevented by entrepreneurs educating themselves or working with experts in the areas of planning, financing, record keeping, taxes, etc., some of the problems are more complex.

For instance, a small business might want to require customer payment up front or on delivery but may need to extend more favorable terms to their customers in order to compete with larger, well-funded competitors. Likewise, some small business owners may have a good handle on financing and record-keeping, but that does not ensure cash flow from customer sales will always match up in a timely manner with operating costs, expenses and payables.

That’s where invoice factoring can help. Invoice factoring is a financing tool most B2B organizations who invoice their customers for payment after delivery of goods or performing of services can use to better manage cash flow. Rather than waiting for their customers to pay, they can factor – or sell – a customer’s invoice to an invoice factoring company like Corsa Finance and get payment for the invoice within days – or even hours.

Factoring invoices allows an organization to gain immediate access to the working capital that might otherwise be locked down in their receivable invoices for weeks (or longer). With immediate payment on invoices, cash flow can be maintained at a more consistent level, and revenue can be matched up more closely with correlating operating expenses.

Speed Up Cash Flow by Factoring Invoices Instead of Chasing Customer Payments

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Business Turnaround Strategy and Invoice Factoring Go Hand in Hand

Business Turnaround Strategy and Invoice Factoring Go Hand in Hand

The top priority in most business turnaround strategies is to speed up and stabilize cash flow, giving a company time to cut expenses, grow sales and regain momentum. Invoice factoring can play a key role as part of a business turnaround plan; here’s why.

Top Business Turnaround Strategy Priorities for Distressed Companies

Implementing tactics for stabilizing cash flow and collecting payments on invoices as quickly as possible is usually priority one when business turnaround consultants come in to help a struggling business. Why? Simple: Speeding up cash flow buys time for a struggling business – time that is critical to allow business restructuring, operational, personnel and procedural changes to be enacted, take root and begin making a difference.

In Best Practices for Turning Around Distressed Companies: The First Steps, the CEO and managing partner of NYC Advisors LLC advises that step one in a business turnaround strategy is to get control of cash and cut unnecessary expenses, including “Collecting your accounts receivables as quickly as possible,” even if it means offering cash discounts for faster payment.

In lieu of offering cash discounts to customers for remitting payments within the first few weeks after an invoice goes out, a struggling business could receive payment on a customer invoice within 1-2 days of when the invoice is generated by factoring, or selling, the invoice to a factoring company for a small fee (called a factoring fee). Furthermore, the factoring fee charged for same day payment on customer invoices will probably be significantly less than a quick-pay customer discount and may even be tax deductible.

Invoice factoring could be preferable to offering customers early payment discounts for many different reasons; such as:

  • Early pay discount still means a delay in collecting on receivables of a few or even several weeks
  • There is no guarantee that a customer will take advantage of an early pay discount, especially if it’s a fairly minimal percentage
  • If early pay discounts are offered to all customers, over time a business could earn significantly less than it might have otherwise collected
  • Customers may come to perceive early pay discounts as “the real price” of goods or services and devalue them in the process
  • Customers may compare terms and demand that their terms be equally favorable to others
  • Early pay discounts may need to be fairly significant (5%, 10% or even more) to get customers to pay right away, whereas your factoring fee will likely range between 4-8%.

Invoice factoring offers a business tools that can stabilize cash flow right away, at a minimal cost. We have programs with factoring fees that start as low as 4 percent which is less than many customer early-pay discounts. In addition, instead of waiting a couple (or several) weeks for customers to pay, factoring clients can get free same-day funding on invoices factored with us, with advances up to 90 percent of an invoice amount.

How Invoice Factoring Can Fuel a Business Turnaround Strategy

For struggling or distressed companies, low cash flow is often the most pressing challenge to address. Speeding up cash flow is a top priority. Without adequate and consistent cash flow, a struggling business will not have time to remediate the problems with its pricing, personnel, marketing, purchasing, overhead and other operational areas that can turn a struggling company back into a thriving enterprise. In other words, speeding up cash flow gives a struggling business the working capital needed to put other components of its turnaround strategy into motion.

Invoice factoring enables businesses that invoice customers for payment on terms to collect payment on invoices immediately, without waiting for customers to pay, for a small fee (called a factoring fee). We can help distressed companies get agreements into place so they get an advance of over 90 percent of the face value of the invoice within 1-2 days of when an invoice is factored at a small cost (or factoring fee) which could be as low as 4 percent.

Here’s how the process works:

DAY ONE Client factors a $10k invoice $10,000
Receive a 93% advance on the invoice $  9,300
Factoring company earns 4% $     400
3% held in reserve $     300
DAY 30, 45 or even 90+ Customer remits payment in full
3% reserve returned to client $     300

 

In this example, factoring the invoice gives a struggling business access to as much as $9,300 on the same day the invoice is generated, and ultimately collects another $300 for a total of $9,600 collected. If the same business elected to extend a 5 percent within 14 days early pay discount to its customer instead, it might wait up to two weeks to collect any money on the invoice at all, and still only receive $9,500 of the invoice amount.

If the customer elects not to take advantage of the early pay discount, the business could receive the full amount but may wait 30, 60 or even 90 days to collect on the invoice. In addition, the business owner or bookkeeping staff may have to invest hours of time on collection phone calls and reminders before the customer pays.

Another advantage of choosing invoice factoring to speed up cash flow as part of a business turnaround strategy (instead of offering customer fast-pay discounts) is that the business can continue (or begin) to extend favorable payment terms to its customers as a marketing advantage. Since the business can collect on the invoice on the same day it’s generated, it does not have to spend time or resources chasing payments or worrying about how quickly a customer will pay.

Benefits of Our Invoice Factoring Services for Your Business Turnaround Strategy

Our goal is to help our clients grow their organizations from where they are today to where they want to be tomorrow. This mantra has impacted the way Corsa Finance tailors invoice factoring programs for our clients and how we do business. For distressed companies, our program can make invoice factoring even more effective as part of a business turnaround strategy, with potential benefits such as:

  • No factoring minimums – clients only factor when it’s best for their business
  • No long-term contracts – use factoring as a transitional, short-term or long-term solution
  • Low factoring fees
  • Competitive advances and fast funding
  • Personal, professional customer care with a knowledgeable account manager
  • Program tailored to the needs of the business instead of a “one size fits all” approach

A free, no-obligation quote is all it takes to find out how factoring invoices can instantly speed up and stabilize your organization’s cash flow, creating a consistent flow of working capital that enables your business to regain market share, keep customers, employees and vendors happy and put your company on a faster track for growth.

We would be happy to provide you with a free, no-obligation quote for invoice factoring services, even it you simply want to compare it with your current factoring agreement to be sure your business is getting the maximum benefit from receivables financing: