Invoice Financing Puts Cash Into Your Business |
Posted: June 16, 2018 |
Advantages of Invoice Factoring Get paid, now! It’s good business to offer payment terms. The extra time for settling invoices can smooth transactions and make paying bills more convenient for your valuable customers. Meanwhile, you often need that money now, and invoice financing can help you put your receivables to work. Invoice financing, also called receivables financing, is a way for businesses to turn their invoices into immediate cash. Use a factor The big advantage of selling your invoices to a factoring company is that you are no longer responsible for collecting payments from your customers. Make sure to look into the differences between recourse andnon-recourse factoring types. You can look to the future of your business while the factoring company settles past transactions. The discounting option You repay the advance as your customers pay their bills. Since your customers will be paying your business as usual, they won’t know that you have obtained invoice financing. Three advantages 1. It’s low or no risk In the case of factoring, you are actually mitigating your risk by passing along uncollected debts to the factoring company. Once the factor buys your invoices, you get your money, and the factor accepts the risk that some customers may not pay. In the case of discounting, you are able to borrow money without putting any of your assets on the line. Your accounts receivable serve as security, and money you are rightfully owed will be used to pay off the debt. 2. You receive immediate payment Invoice financing turns promises to pay three months from now into money you can use today. Use the money to even out your cash flow so that you can meet your own financial obligations. 3. You hand collection responsibility to someone else Once you sell your invoices to a factor, you are done with them. It is up to the factor to collect the money your customers owe. You and your employees can spend energy on more profitable tasks. Cash injection Invoice financing is using your accounts receivable to obtain immediate cash. You can sell your invoices outright or take an advance on them. Either way, it’s a low-risk way to inject cash into your business.
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