Invoice factoring is done by small businesses when the money from invoices sent out isn’t coming in quickly enough to meet expenses.
To generate money more quickly, the invoices are sold to someone else who will collect the money and keep it.
This means faster money for the business and no collection hassle.
To determine whether invoice factoring is right for your business, consider these questions:
Is Your Profit Margin Thin?
If you’re operating with a razor-thin profit margin, an unexpected expense or slow period can be financially devastating. To continue to meet operating expenses, invoice factoring may be needed for fast money. In addition, selling the invoices means that there is no chance of having invoices that never get paid.
More from GFC, Below
Is Your Business Already in Debt?
If your business already has a great deal of debt, taking on more payments and interest can sink your business. Taking out a loan requires both. And because you’re already making debt payments, you may not be able to afford another monthly payment.
Invoice factoring is a useful financial solution in high-debt cases. Because you don’t have to pay the money back, there is no worry about adding to your debt load.
And with the fast infusion of money, you can keep on top of your debt payments.
Is Your Bookkeeping a Mess?
If you’re struggling to keep up with the invoices sent out and the eventual payments for them, invoice factoring might be a solution. With this system, there is no long wait for payment, simplifying the bookkeeping. This works well for small businesses that don’t have an accountant or dedicated bookkeeper. It means less paperwork, fewer phone calls and a lesser chance of messing up complicated invoice-payment arrangements.
Do You Have Trouble Collecting Payment?
If you have had problems with collecting on your invoices, you may know how much time and expense it takes to collect a payment. It can require collection agency fees, attorney fees and hours of correspondence to collect a debt. Small businesses often have trouble affording collections and can’t take time away from the business to attempt collection.
When you sell the invoice, the buyer of that invoice is responsible for the collections. Many companies that buy invoice such as http://cbacfunding.com are well versed in collections and have the manpower needed to go after defaulters. They are often in a better position to manage the risk of non-payment than a small business that needs payment for each invoice.