It’s not difficult to send an invoice and collect a payment, which is why most companies start out doing that in-house. However, collecting on your receivables is a process that can be easily outsourced. With invoice factoring, you can get paid faster without having to deal with receivables servicing in Madison, WI. In this article, you’ll learn about 4 of the reasons why companies choose to sell their invoices.
Long Payment Cycles
In the corporate world, it’s customary to pay 30, 60, or even 90 days after you receive an invoice. That means a business can use the products or services, resell them, and then pay the original vendors and contractors. Some industries have even longer payments cycles of 120 days. That’s a long time to wait to get paid.
If your customers won’t pay for several months until after you send an invoice, your business is a great candidate for invoice factoring. When you sell invoices to a factoring company, you can get paid within 24 hours of sending the invoice. Then, you can use the money to pay your expenses, including general operating costs and payroll.
Some customers take longer to pay than others. They may not even pay your invoice when it’s due. Needless to say, this puts a huge financial strain on your company. When you have to wait longer for your product, paying your ongoing expenses and buying new products becomes more difficult. To avoid this problem, you can take advantage of invoice factoring and receive cash right away.
Unexpected expenses can crop up anytime, both for households and businesses. You may be in a cash crunch if something in your business goes sideways. For example, one of your company vehicles might need extensive repair or machinery may need to be replaced. In this case, it would be expedient to get paid for your outstanding invoices without delay. You could pressure your customers to make an early payment. However, you could simply sell invoices to a factoring company. Factoring provides the benefits of early payment and good customer relations. When you take advantage of invoice factoring, unexpected expenses won’t put a big dent in your budget. You can still make payroll and purchase new inventory without going into debt.
Occasionally, you may run into different investment opportunities for your business. It could be that you frequently purchase a product or raw material and it is suddenly available at rock-bottom prices, but only if you can pay right now and buy lots of it. With invoice factoring, you can take advantage of these deals and generate more profit down the road.
There are different reasons to choose receivables servicing in Madison, WI, and your company may benefit in other ways than the business next doors. But one thing that this method always offers is control over your cash flow and when you get paid.
Should You Sell Invoices to a Factoring Company?
There are a number of small businesses that would benefit from selling invoices to a factoring company. First, if you sell to other businesses on credit terms, you will benefit from the immediate cash in hand. Next, if you need to improve your cash flow in addition to your existing financing plan, factoring can work alongside other financing options. Further, selling invoices is accessible to businesses that may not qualify for a hefty bank loan. So, if you think additional cash on hand could help your business grow, selling invoices to a factoring company could be a great fit.