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Don't let late payments hurt your business

Don’t Let Late Payments Hurt Your Business

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

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

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

Amount tied up in unpaid customer invoices every day

  1. Relationship Power

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

  1. Financial Power

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

SMBs with late payments also pay their own suppliers late

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

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

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

  • Late payments – overdue invoices
  • Slow collections

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

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

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

1. Factor invoices

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

2. Offer fast-pay discounts

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

3. Require large deposits

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

4. Invoice in real time

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

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

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

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

  • Average monthly sales or amount of invoice to factor
Maximize Business Cash Flow with these 10 Tips

Maximize Business Cash Flow with these 10 Tips

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

6 Signs You Need to Expedite Business Cash Flow

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

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

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

10 Tips to Help You Maximize Business Cash Flow

1. Raise prices.

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

2. Improve upgrade and add-on sales.

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

3. Cut costs.

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

4. Incentivize innovation.

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

5. Speed up collections.

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

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

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

Request a no-cost, no-obligation quote:

  • Average monthly sales or amount of invoice to factor

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.

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