It is always important for a company owner to consider the big picture as to how any financing or funding is going to impact the overall picture. Choice in short-term cash flow options can be particularly important to consider for business as they can end up having long-term consequences.
One of the most effective options for businesses requiring short-term cash flow solutions in found in factoring receivables. Accounting using this funding option is very simple and will result in your accounting department spending less time in dealing with late payments or in chasing customers with payment reminders.
The Benefits
When it comes to factoring receivables, accounting is transferred to the factor, at least for those invoices the business chooses to sell. This means that the factor assumes the back office role for these invoices.
Most of the top factors provide customers with a secure login through their website portal. This allows the business accounting department to immediately see the status of their account with the factor.
Through this option when factoring receivables, accounting teams will know when the residual balance held by the factor is going to be transferred to the business account. Most factors will provide approximately 80% of the value of the invoices sold immediately, holding back 20% until the customer pays and then deducting the fees for the factoring service.
Professional Support
With a professional team dedicated to working with your customers and processing payments, the system is much more efficient. There are no accounts that fall through the cracks or are overlooked, help to maintain a consistent cash flow.
When your accounting team is not having to deal with tracking payments and sending out reminders, they can focus on the day to day needs of your business. Of course, if you choose to factor all accounts receivable a business may find they can decrease the size of their accounts receivable staff, which can help to save costs and overhead immediately as well as in the future.
