rooster standing on pile of coins to represent the question of which came first, your cash flow problems or your business problems?

Cash Flow Problems or Business Challenges – Which Came First?

February 26/0 Comments/in Cash Flow, Invoice Factoring, Small Business /by Corsa Finance

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. But often, slow cash flow is a symptom, not the cause.

Earlier, we published an article listing the top ten reasons B2B startups fail – or fail to thrive – during their early years. While “access to working capital” was not explicitly 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? This is a classic “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. We also share some steps you can take to address the challenges.

What To Do During Slow Periods in Business

Create a cash flow forecast. The first step in managing cash flow during slow periods in business is to create a cash flow forecast. This forecast should include your projected cash inflows and outflows for the upcoming period. It should also include any expected changes in revenue or expenses. A cash flow forecast will help you identify potential shortfalls so that you can take action to address them before they become a problem. If you project running short of cash during the slow period, consider looking into invoice factoring. Turn the invoices into cash now to cover shortfalls during the slow period.
Minimize expenses. It’s important to minimize expenses as much as possible during slow periods. This may mean cutting back on non-essential expenses, renegotiating contracts with suppliers, and reducing employee hours. Consider outsourcing select business operations. One of the benefits of invoice factoring is that you can turn your accounts receivables function over to your factoring company. Reducing the labor needed to manage and collect outstanding invoices can help offset the factoring costs.
Offer incentives for customers. Do you have creative ways to incentivize customers to shop with your business now? Offering discounts is one method; however, rather than cutting your costs, consider adding value to your product or service. For example, if your company offers commercial cleaning services, add an upgrade service such as window washing now or during a future visit if the client books during your slow period. The value of adding cash flow today could offset the marginal labor expense to provide the incentive service.
Increase marketing efforts. One of the first expenses many business owners cut is marketing. But that’s comparable to turning off the water faucet when you’re thirsty. It can be critical to increase or laser-focus your marketing efforts for slow periods to reach new customers and encourage existing customers to continue shopping with your business. This may mean using social media and email marketing, hosting events to attract new customers, or partnering with other businesses to host sales or promotions.
Review payment and credit terms. During slow periods, reviewing payment and credit terms with your suppliers and customers can improve your cash position. This may mean negotiating more favorable terms with your suppliers or offering incentives to customers who pay early or in full. Work with a factoring company that doesn’t require you to sell all invoices. You can offer customers who pay within ten business days a lower rate and then factor the invoices for the slower-paying customers with the increased rate offsetting the factoring fee while you net the same amount regardless of payment timing.

In summary, managing cash flow during slow periods requires thoughtful planning and management. But you have tools available, and depending on your circumstances, you can weather the downturn and be prepared for future growth.

How to Solve the High Sales - Low Cash Flow Dilemma

Solving the High Sales – Low Cash Flow Dilemma

December 8/0 Comments/in B2B, Cash Flow, Entrepreneurs /by Elizabeth

For entrepreneurs, startups and small business, simply generating more sales might not be the answer. Successful businesses can still fail! Find out how to improve low cash flow to make your organization more sustainable.

Why low cash flow – not low sales – is the common lament of entrepreneurs

An article titled The Irony of Successful Sales Growth describes one of the challenges faced most often by small business owners and entrepreneurs as low cash flow. When an organization experiences low cash flow along with limited reserves and lack of resources (such as lack of investors or inability to obtain a bank loan), the seriousness of the situation can quickly become acute.

Many businesses that are successful – in that they are growing and increasing sales – can even create their own unique recipe for low cash flow when the need to purchase additional inventory, hire staff, or increasing operating expenses outpace incoming cash flow. This can be especially difficult for B2B sellers who often extend especially favorable terms to customers as a competitive advantage.

“The entrepreneur’s lament is one of the great ironies of the marketplace;

a small business in danger of failure as a result of extreme success.”

(Jim Blasingame, The Irony of Successful Sales Growth)

But the challenges presented by low cash flow are not only limited to organizations like (B2B) business-to-business companies that sell to customers on terms. Retailers and service organizations also face the challenge of making hefty investments in inventories before offsetting sales occur. If a retail organization’s projections about consumer demand do not match up with actual sales, they too may find themselves in a cash crunch.

Perhaps the best news for business owners trying to solve the challenge of low cash flow is that it is a common challenge, and there are many ways for a business to improve its cash flow. We previously shared an article with ten ways to maximize business cash flow that might also interest you further.

Here are some of the solutions for managing the challenge of low cash (or slow cash flow):

1. Plan for growth so that you know where the money and resources needed for fast reinvestment will come from.

2. Avoid use of operating cash for non-operating expenses (such as purchasing capital equipment).

3. Closely monitor accounts payable and accounts receivable

4. Understand the relationship between Accounts Receivable Days (how many days it takes customers to pay) and Accounts Payable Days (how long you have to pay vendors).

Ideally, you will have the option to work with vendors who will extend terms that make it possible for customer payments to come in before supplier invoices become due; however, that is not always going to be the case.

You may be able to speed up customer payments by offering discounts to customers who pay on delivery or who pay very quickly, requiring customers to make partial payments or deposits upfront, and conducting more thorough due diligence checks before extending customer credit. Plus, you can spend more time and money on collections efforts rather than taking a more passive approach to unpaid invoices.

Stop chasing customer payments – factor receivables for fast access to working capital

B2B organizations that invoice customers upon delivery of goods or completion of services may be able to immediately improve cash flow and better manage receivables by factoring – or selling – customer invoices to a factoring company.

When a client factors (or sells) an accounts receivable invoice to us, they receive funding for up to 95 percent of the face amount of the invoice for a small fee, called a factoring fee, within 1-2 business days. In this way, they can get access to the working capital they need to run and grow their operations long before their customer is required to pay.

Since factoring clients do not have to wait for customers to pay, they can reinvest in growing their business more quickly. They can also extend generous payment terms to their customers, which could create a competitive advantage.

Get a free, no-obligation quote for invoice factoring or request more information about the invoice factoring process.

What is Invoice Factoring?

November 18/0 Comments/in Accounting and Finance, Cash Flow, Invoice Factoring, Receivables Financing /by Elizabeth

Invoice factoring is a business finance tool that gives an organization nearly immediate access to money their customers owe them without waiting 30, 60, 90 days – or even longer – for the invoices to be paid.

Instead of waiting for customers to pay, the business can factor an invoice with a factoring company for a small fee (called a factoring fee) and receive an immediate advance, which could be up to 95 percent (or even more) of the invoice amount.

Why do companies factor invoices?

Though the need for expedited or more consistent cash flow is the reason most companies factor invoices, some of the other common reasons factoring clients cite include:

Need to unlock working capital to fuel business growth
Working capital can be leveraged for better terms with suppliers
Customer accounts with generous terms, often 30-90 days
Need working capital to take on larger accounts or big orders
Slow-paying customers
More consistent cash flow
Better ability to meet operating expenses and payroll
Capital expenditures like equipment purchases, repairs, renovation, or expansion

The practice of invoice factoring is centuries old and has played an important role in business finance. Any organization of any size that provides goods or services to other businesses, government agencies, retailers, or other commercial organizations on payment terms may be able to factor receivables to improve cash flow and unlock working capital.

What type of businesses factor invoices?

Factoring clients come from many different industries where invoice factoring is commonly used to expedite cash flow, including:

Staffing and temporary employment agencies (security services, nursing, etc.)
Business consulting and B2B business services
Trucking, transportation, logistics
Supply chain distributors and manufacturers
Vendors selling through Costco, Walmart, and other mass retailers
Textile, clothing, accessories, and other wholesalers
Oil and gas (and all gas and oil field contractors)
Energy and utilities companies and contractors – and others

Nearly any type of company that invoices customers for payment or waits more than 15 days or more to get paid after completing delivery of goods or fulfillment of services might be able to improve cash flow immediately by factoring invoices.

How does the invoice factoring process work?

Invoices factored are typically funded within 1-2 business days – up to 95 percent (or even more) of the face value of the invoice, with the remainder placed in reserve as a holdback, pending customer payment of the invoice.

As an example, if a businesses completed delivery of goods or services to a customer and generated an $18,000 invoice, with net 30 (or even longer) terms, they could unlock most of that working capital within hours instead of waiting weeks or even months on payment.

Assuming a factoring fee of 3% and an advance rate of 95%, here’s how it would work:

Invoice Factoring Process Overview
Day 1 –	Generate a $18,000 client invoice and factor it
– 24-48 hours	Receive an advance of $17,100 (95%) Factoring company earns $540 (3% factoring fee)
Day 30+	Receives the $360 holdback (2% of the invoice amount) after the invoice is paid

What are the benefits of invoice factoring?

Faster cash flow!

Businesses that want to expedite payment of accounts receivable invoices can turn to a receivables factoring company. Instead of waiting on customer payments, they can factor a customer invoice on the same day it is generated and receive an advance of up to 95 percent of the face amount of the invoice right away.

Advance rates may be even higher, and factoring fees even lower for larger invoices or for companies who factor on a regular basis and receive a volume discount.

Factoring receivables enables you, a business owner, to focus on growing your business rather than chasing invoices or performing collections. They gain almost immediate access to working capital by speeding up cash flow so they can reinvest in their company much more quickly.

Factoring receivables could also be the key to positioning your business to be able to take advantage of emerging opportunities.

Organizations that factor invoices expedite cash flow, which means they have more flexibility to meet operational expenses. They have the flexibility to extend more generous payment terms to their customers as a competitive advantage and can reinvest working capital in their business more quickly in order to expand, service larger accounts, or take on new customers.

There are also additional benefits for businesses that choose non-recourse invoice factoring over factoring with full recourse.

Non-recourse factoring is less common in today’s economy because non-recourse factors assume the credit risk for the invoices they purchase. When you factor invoices with a non-recourse factoring company, you may be able to completely eliminate financial risk from bad debt. Find out more about factoring invoices with recourse vs. non-recourse factoring companies.

Speed up cash flow and grow your business faster by factoring invoices instead of waiting 30, 60, 90 days or longer for customers to pay.

Since we have competitive rates and fees, working with us will not cost your business more, but it could help you get a better factoring agreement. You want to work with an invoice factoring company that goes from approval to funding quickly and looks for reasons to say “Yes!” when you submit invoices for factoring. Our factoring services offer low fees, high advances, and flexible terms, such as:

No long-term contracts
No monthly minimums (you choose when and how much to factor)
Retain control of billing your customers, or let the factoring company do the work
Non-recourse factoring (the factoring company assumes the credit risk)
Spot factoring
Micro-factoring
Small invoices welcome!
Credit checks to help you vet new customers
No application or due diligence fees
No hidden fees
Fast approvals and funding

Most importantly, we promise a high level of customer service to our factoring clients. We want you to work with a financing partner who understands your preferences and unique business needs, saving time and reducing the stress of managing receivables. Take the next step and request a free, no-obligation factoring quote to determine if this business finance tool could help your company grow faster.

white block letters on red background stating "late payment"

Don’t Let Late Payments Hurt Your Business

January 27/0 Comments/in Accounting and Finance, B2B, Cash Flow /by Elizabeth

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.

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.

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.

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 action 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

Submit an inquiry 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.

green sign that says "maximize cash flow just ahead"

Maximize Business Cash Flow with these 10 Tips

November 12/1 Comment/in Accounting and Finance, Cash Flow, Small Business /by Elizabeth

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 that are no longer needed.

4. Incentivize innovation.

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

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.

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.

Request a no-cost, no-obligation quote:

arrows pointing to business growth strategy

8 Ways Invoice Factoring Can Help You Grow Your Business Faster

November 12/0 Comments/in Accounting and Finance, Cash Flow, Invoice Factoring /by Elizabeth

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 to 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).

Find out more about financing opportunities

7 Ways to Speed Up Customer Payments

October 24/1 Comment/in Accounting and Finance, Business Strategy, Cash Flow /by Elizabeth

What is Non-Recourse Factoring?

July 28/0 Comments/in Cash Flow, Invoice Factoring, Receivables Financing /by Elizabeth

When an organization is considering expediting its cash flow through accounts receivable factoring, it is important for that organization to understand the value 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.

What Is Non-Recourse Factoring? Beyond Factoring Fees and Advances

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 the 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. If the factoring client’s customer cannot 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 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

Many companies choose factoring services to free up working capital in order to operate more efficiently and grow more quickly. Plus, 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!

We would be happy to answer any questions you might have and provide you with a no-risk, free, no-obligation quote.

The words "hidden costs" burned into wood

The Hidden Costs of Invoice Factoring

July 26/0 Comments/in Cash Flow, Corsa Finance, Invoice Factoring /by Elizabeth

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 offered.

These fees and charges may seem small, but when you do the math, you can clearly see that they quickly eat into your 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 charge extra fees for these tasks.

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 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 into 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 the 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 choose 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 offer full-recourse factoring, but we also offer non-recourse factoring services that help minimize an 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 generate 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 that you can compare against your current agreement.

goldfish jumping from a lightbulb fishbowl to a round fishbowl for business turnaround stratgy

Business Turnaround Strategy and Invoice Factoring Go Hand in Hand

March 30/0 Comments/in Cash Flow, Invoice Factoring, Receivables Financing /by Elizabeth

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 customers 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 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 and 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 if you simply want to compare it with your current factoring agreement to be sure your business is getting the maximum benefit from receivables financing:

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

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

Emotional Pricing and Not Understanding Your Pricing (#1 and #4 on the list)

Living Too Large (#2 on the list)

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

Lack of Planning (#5 on the list)

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

Poor Credit Granting Practices (#8 on the list)

Expanding Too Fast (#9 on the list)

Get more information about speeding up cash flow:

What To Do During Slow Periods in Business

Why low cash flow – not low sales – is the common lament of entrepreneurs

Stop chasing customer payments – factor receivables for fast access to working capital

Why do companies factor invoices?

What type of businesses factor invoices?

How does the invoice factoring process work?

What are the benefits of invoice factoring?

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

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

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

6 Signs You Need to Expedite Business Cash Flow

10 Tips to Help You Maximize Business Cash Flow

Business Cash Flow Financing – 8 Benefits of Invoice Factoring

8 Ways Invoice Factoring Can Help You Grow Your Business Faster

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

Find out more about financing opportunities

What Is Non-Recourse Factoring? Beyond Factoring Fees and Advances

Comparing Non-Recourse Factoring to Recourse Factoring

How the Factoring Process Works with Non-Recourse Factoring Companies

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

Eliminate the Hidden Costs of Invoice Factoring

Top Business Turnaround Strategy Priorities for Distressed Companies

How Invoice Factoring Can Fuel a Business Turnaround Strategy

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