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Solving Slow Cash Flow with Invoice Factoring

Beyond Price and Profit – How Slow Cash Flow Can Hurt You

Profitable business can still be poor ones. Slow cash flow can slow or stall growth. Plan for healthy cash flow, not just profit margins, to build a growing, sustainable business.

High Profit Margins Won’t Keep Slow Cash Flow from Hurting a Growing Business

The number one reason businesses go under is not lack of profits, but lack of cash, or slow cash flow. It is not enough to plan and price for profitability. To be successful, grow and thrive, you have to accurately forecast and plan so that your business has adequate money coming in.

In 10 Things Every Small Business Needs to Do, Bplans.com cites the number one reason small businesses go bankrupt as slow cash flow — not lack of profits. It’s a good reminder that accurately predicting the ebb and flow of your small business cash flow and planning accordingly is going to be a key factor for your success.

Small business cash flow is represented in financial statements in essentially three forms:

  • Operational cash flow is money coming in or going out as a result of an organization’s business activities; obviously to be sustainable, a business needs to have more money coming in than going out (although short term periods of negative cash flow should occasionally be planned for and *managed).
  • Investment cash flow is money received from the sale of long-life assets or spent on capital expenditures (things like investments, acquisitions or assets expected to have a long life)
  • Financing cash flow is money received from the issue of debt and equity or money paid out as dividends, share repurchases or debt repayments

Small business cash flow can be impacted positively or negatively for a number of different reasons:

  • Sales (volume) higher or less than expected
  • Payment terms that you extend to your customers
  • Naturally occurring seasonal or cyclical highs and lows
  • Interruptions to the customer buying cycle, such as economic recession or concerns
  • Introduction of new technologies, additional competitors or other changes to the marketplace
  • Influx or depletion of numbers of potential customers in your target markets
  • Equipment failures or facility deficiencies
  • Lack of inventory or space needed to achieve adequate sales volume

Apart from the unexpected, many of these factors that can create slow cash flow should be considered as you draw up your business plan and revisit your long-range plan from year to year. In fact, many of these conditions should reveal themselves in the SWOT and PEST exercises common to most (formal) small business plans, long range plans or marketing plans.

Solving Slow Cash Flow with Invoice Factoring

One way to mitigate short term slow cash flow challenges is to take advantage of small business funding options, like those provided by Corsa Finance. We offer small business cash flow financing through invoice factoring (also called accounts receivable factoring).

Small business funding through invoice factoring occurs when a company that invoices their customers for payment factors – or “sells” – the invoice to a factoring company at a discount (for a low factoring fee). When they do so, they receive up to 93% of the invoice amount immediately instead of having to wait for customer to pay the invoice. Once the small business’s customer has paid the invoice any amount held in reserve goes back to the small business, too. Factoring can eliminate the problem of slow cash flow completely, since invoices can be factored on the same day a customer invoice is generated.

Better cash flow = better business performance and growth!

Whether you employ one of our business finance tools to improve cash flow and get access to working capital or you have another means of financing, having adequate cash flow to meet operational needs and to execute business growth strategies is critical for the long term health and success of your small business.

With slow cash flow, you may have trouble meeting day to day operational needs, you might come up short for payroll, or you might find yourself unable to make capital investments in order to grow. With expedited cash flow, you will be able to execute many business growth strategies, such as:

  • Expanding, renovating or remodeling
  • Meeting expenses on time, including payroll
  • Replacing broken, aging or obsolete equipment
  • Hiring additional employees
  • Purchasing larger quantities of inventory or new product lines
  • Adding new service capabilities to your service menu
  • Executing large-scale marketing initiatives
  • And more

We would be happy to help you decide if invoice factoring can help your business. Feel free to contact us at 855-882-6772 or request a free, no obligation quick quote for cash flow financing online and get answers in as little as 24 hours. 

  • Average monthly sales or amount of invoice to factor
5 Ways to Make Your Business More Profitable by Factoring Invoices

5 Ways to Make Your Business More Profitable by Factoring Invoices

Few businesses can say they don’t want improved cash flow. From budget deficits to delinquent accounts, here are five signs your business might be more profitable by factoring invoices instead of waiting on customer payments.

Getting paid more quickly can help entrepreneurs, startups and small businesses in a big way by improving cash flow and supplying the cash-on-hand needed to grow.

Small businesses often dream of landing a big account but find that large corporations hold all the cards when it comes to setting terms, including pricing, profit margins and timing of invoice payment. Slow-paying customers make for fast cash flow drains that can hurt a small business, erode profits and even threaten viability.

The good news is that there is more than one way to improve cash flow. Factoring invoices can put the power back in your hands and give your organization the money it needs to become more profitable and grow more quickly over the short or the long term.

5 Signs a Business Should Consider Factoring Invoices to Become More Profitable

  1. Discouraged by Delayed Payments

By the time you make a sale, the math is already upside down. When you consider that you have incurred costs for marketing and advertising, manufacturing, shipping, supplies, transportation, payroll and all of the other costs of doing business, it’s easy to see why it would be discouraging to wait for customers to pay on time, let alone waiting on customer payments that are past due.

Analyzing 409 companies from Standard & Poor’s 500-stock index puts the average time to pay suppliers at 46.5 days, but also notes that small businesses wait even longer to get paid, two months on average. Delayed payments mean delayed reimbursements for the costs you’ve incurred as well as delayed reinvestment in order to grow your business.

When you factor invoices, you collect payment immediately. This empowers you to maintain more consistent cash flow and ensures that you will have money on hand to meet expenses.

  1. Dealing with Budget Deficits

When you are waiting for customers to pay, cash flow challenges can compound. If you make late payments, you may incur penalties that further erode your company’s profits. When you factor invoices, you gain immediate access to the money customers owe you. As a result, you can pay your creditors more quickly. Knowing that you will have the cash needed to pay can even give you leverage with suppliers that will enable you to save money by negotiating more favorable terms with vendors or allow you to take advantage of volume discounts. When you cut your costs and save money, you improve your profit margins!

  1. Desire to Limit Risk of Defaulting Customers

Slow-paying customer accounts are bad enough; but what happens when your customer can’t pay at all? Dealing with bad debt is one of the costs of doing business that can cut into your profit margins in a big, bad way.

Bad debt is a big problem. In 2010, US businesses placed $150 billion with collection agencies, who were only able to collect about $40 billion of that total (www.debtcollectionanswers.com). The SBA (Small Business Association) reports that only about 1/3 of all new businesses will still be around after 10 years. If a customer has filed for protection or gone out of business, even costly recovery efforts may prove fruitless.

Factoring invoices with a non-recourse factoring company is one way to protect your company – and your profit margins – from the negative impacts of bad debt. Non-recourse factors assume the credit risk for factored invoices, which can reduce or even eliminate your organization’s risk from bad debt.

  1. Looking for Competitive Advantages

Being able to improve profits and better manage cash flow can lead to additional perks that can help your business become even more profitable. Factoring invoices gives you access to the money locked down in customer receivables right away – without waiting for customers to pay. Since waiting on customer payments is no longer a problem, you can create a competitive advantage for your organization by extending more favorable terms to your customers.

  1. Pursuing Bigger Opportunities

Since factoring invoices allows you to reinvest in your business more quickly, you can also grow more quickly. Whether you want to take on more work simultaneously, pursue bigger projects or land bigger fish, factoring gives you the ability to put more capital to work to promote and market your business, to expand, or to pay for supplies and the up-front costs needed to serve larger accounts or take on more jobs at the same time.

Request a free, no-obligation quote and expedite cash flow by factoring invoices instead of waiting on customer payments. Contact us at 855-882-6772, speed up the process by applying online or email us using the short form below.

  • Average monthly sales or amount of invoice to factor