Entrepreneurs become masters of multi-tasking. Planning new projects, making sure current tasks are on track, monitoring marketing and web-site results among other important tasks. Staying on top of your company’s cash flow is even more important in today’s strained economy. Contending with supply chain issues and labor shortages business owners cannot afford to be caught short when a critical payment must be made.
Modern accounting and banking software give entrepreneurs fast and easy access to the information they need. With a quick scroll thru their smart phone a business owner can see how much money they have in the bank, what invoices are due for payment and when the next payroll is due. This information is critical to have, but when cash balances are low smart business owners pro-actively work to speed up their cash flow.
Get Money in Quickly
Every business owner knows the drill – drop everything and start dialing for dollars! In a frantic effort to get money into the bank, the owner starts calling customers to coax them to quickly pay their invoices. Calls are often made to the customers with the best relationship who are likely to respond to a plea for quick payment. This usually results in getting the cash needed to meet immediate expenses, the owner’s best customers are wondering about the strength of the business and the slowest paying customers may have been entirely overlooked.
Monitor Your Receivables
Experienced business owners have a detailed invoicing and collection policy in place. This will preempt the necessity of making desperate pleas for money – as each invoice is already being diligently monitored. A good invoicing and collection policy will include:
- Verification that invoices are being emailed to all necessary parties; purchasing and payables, that email addresses are correct, purchase order numbers are listed, and payment due date.
- Verify that the invoice has been approved for payment and scheduled for payment on or before the due date.
- If payment is not received on the due date, inquire immediately as to when payment will be made.
Speed Up Cash Flow with Factoring
If you’re dealing with a customer who demands extended payment terms, or if you have outgrown your working capital invoice factoring is a convenient tool to speed up your cash flow. Funding your business with invoice factoring works like this:
- The business owner establishes a factoring relationship with a factoring company.
- The business owner sells their invoices to the factoring company.
- The business owner receives 85% – 90% of the sold accounts receivable, giving them the cash needed for payroll, operating expenses, and starting the next project.
- The factoring company is paid on the invoices and returns the balance of the invoice to the business owner less the agreed upon fees.
The factoring company will monitor your invoices, giving you more time to focus on growing your business. By utilizing a factoring company, you now have the confidence to take on larger projects, knowing that your expenses will be paid for by factoring. And factoring does not create any debt that you have to pay back.