Does it take your clients two months - that's right, two months - to pay up? If you are, then you are just like many other business owners worldwide close to pulling their remaining hair out due to the stress this can cause. Sad fact is that even if your business is profitable, that does not always equate to financial stability. Quite the opposite, many times a business may have great profits and a very unreliable cash flow.
Ironic, isn't it? Elementary. Your clients seem to be walking in the park and chatting with their friends as they wait 60 days to pay up, while you are beside yourself trying to juggle salaries, rent and other business payables. While this might be a rosy long-term scenario for you, the short-term effects would be a paucity of available cash for the meantime. Only exception is when you have a substantial amount of cash saved up in your bank account.
But, what do you do if you are new, growing or just don't have a lot of funds in the bank? A business loan, perhaps? You must be kidding! It takes a LOT for business loans to get approved. So with that in mind, alternatives such as invoice discounting should definitely be mooted. Invoice discounting is a form of financing that is not offered by a bank - it's offered by a factoring company.
Invoice discounting is so simple even a child can figure it out - you sell your invoices at a discounted rate in exchange for cash. The ramifications in terms of value are none too labyrinthine, to be honest. Are you willing discount between 1.5% to 6% from your invoices to get paid now? A lot of business owners offer an incentive - a 2% discount if their clients pay them within 10 working days. That last abstraction isn't much different from how invoice discounting works.
Of course, invoice discounting (or invoice factoring as it is also called) is not for every business. This is best utilized if you have profit margins of 15% or greater and if you use the advance funds in paying for business-related costs or new business ventures.
No exceptions to the rule - factoring companies would always take two installments to purchase your invoices. The first installment, or advance payment, would take up more than 50% of the invoice, sometimes as much as 85%. The remaining 15% would come in the form of a rebate, less the discount, once the invoice is finally paid up.
Invoice discounting is easy to obtain and can be set up in days. Really, all you would need would be invoices from your actual clients in order to qualify. So, if you are sitting on a whole bunch of slow paying invoices, be sure to consider invoice discounting.
Ironic, isn't it? Elementary. Your clients seem to be walking in the park and chatting with their friends as they wait 60 days to pay up, while you are beside yourself trying to juggle salaries, rent and other business payables. While this might be a rosy long-term scenario for you, the short-term effects would be a paucity of available cash for the meantime. Only exception is when you have a substantial amount of cash saved up in your bank account.
But, what do you do if you are new, growing or just don't have a lot of funds in the bank? A business loan, perhaps? You must be kidding! It takes a LOT for business loans to get approved. So with that in mind, alternatives such as invoice discounting should definitely be mooted. Invoice discounting is a form of financing that is not offered by a bank - it's offered by a factoring company.
Invoice discounting is so simple even a child can figure it out - you sell your invoices at a discounted rate in exchange for cash. The ramifications in terms of value are none too labyrinthine, to be honest. Are you willing discount between 1.5% to 6% from your invoices to get paid now? A lot of business owners offer an incentive - a 2% discount if their clients pay them within 10 working days. That last abstraction isn't much different from how invoice discounting works.
Of course, invoice discounting (or invoice factoring as it is also called) is not for every business. This is best utilized if you have profit margins of 15% or greater and if you use the advance funds in paying for business-related costs or new business ventures.
No exceptions to the rule - factoring companies would always take two installments to purchase your invoices. The first installment, or advance payment, would take up more than 50% of the invoice, sometimes as much as 85%. The remaining 15% would come in the form of a rebate, less the discount, once the invoice is finally paid up.
Invoice discounting is easy to obtain and can be set up in days. Really, all you would need would be invoices from your actual clients in order to qualify. So, if you are sitting on a whole bunch of slow paying invoices, be sure to consider invoice discounting.
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