In a recent report out from Dun and Bradstreet, the credit reporting agency disclosed the trend is up for businesses taking more than 90 days to settle their payables. In December, the number of invoices outstanding for greater than 90 days had increased by 20%. Oddly enough, smaller firms are actually settling their accounts more rapidly than their larger counterparts. Businesses with 5-20 employees took an average of 50 days to pay, while companies with more than 500 employees took 60 days or more.

Small businesses generally have more cash flow challenges and, as a result, need a way to address this receivables shortfall. One valuable tool for the small to medium-sized business with cash flow pains is the use of receivables factoring, also called debt factoring.

When a small business factors their receivables, they receive an advance on their outstanding invoices to obtain working capital. As we all know, cash flow is the life blood of any business; large or small. Slow payments can seriously hamper the cash flow of a business, crippling the business. As long as larger companies drag out their remittance process small businesses will need to be creative in the way they approach their cash flow issues. We at American Funding Solutions offer a variety of financial options to help the small to medium business keep their cash flowing, enabling them to make payroll, receive vendor discounts, purchase supplies, etc.

1) You deliver the goods/services to your customer/client.

2) You create an invoice > submit it to your customer and the finance company.

3) The finance company will verify the invoice and wire the bulk of your funds into your bank account.

4) The finance company waits for payment from your client/customer.

5) The finance company receives payment for the invoice.

6) Reserve funds are disbursed back to you, less the discount fee.

You receive cash in about 24 hours after submitting your invoices. No need to wait 30, 60, or 90 days for your customers to pay! The more business you do, the more working capital is available. Funds are virtually unlimited!

It’s an easy, safe, and fast financing tool to provide working capital for growing your business.

We have all heard it said many times that CASH IS KING! Well in these uncertain economic times it seems more difficult than usual to get an audience with the ‘king’.  My specialty is helping those in business to get a handle on their cash flow challenges. I thought it might be helpful to offer a few hints on improving your cash flow.

1) The foundation of good cash flow practices lies in the ability of the business owner to manage their expenses. You need to consider every expense very carefully. Ask yourself, “Will this really enhance or add value to my business? Do we really need it?” If the answer is, “yes”, then you should ask for a discount, possible try to barter, or negotiate terms on the purchase. Remember, every dollar counts!

2) This is still in line with managing your expenses… budget! You need to make a list of your monthly bills and expenditures. Include on the list the due date of each payment and ensure that you keep to that schedule. This will help in two ways: 1) you can easily track your payments and budget accordingly and 2) helps prevent late fees or overdraft charges, which would add to your liabilities.

3) Review your invoicing/collection strategy to see any areas for improvement. You might consider billing from a ‘due upon receipt’ perspective. You may find that invoicing on a weekly basis, as opposed to monthly, can improve your cash flow. A courtesy phone call is often just enough to speed up a payment. Nothing harsh; “Hello, I just wanted to touch base with you and ensure you had received your invoice.” Something this simple can often move the dialogue along and, in turn, the payment.

4) If you accept credit cards that often improves your cash flow. Some programs feature a payment link right on the emailed invoice. This enables your client/customer to open the invoice, click the link, and have the convenience of paying the invoice and getting it of their ‘to do’ list. In the event you do need to follow up on a slow pay, you then have the added benefit of, “Hey, I can take your credit card payment over the phone, if that would make it easier for you.”

5) Factoring your invoices can certainly help with the cash flow. Many small businesses serve larger businesses that routinely take 60 – 90 days to pay. A medium to small business doesn’t have the luxury of reserves that keep cash flowing during that payment period. Factoring can instantly improve your cash flow, providing money for monthly expenses, payroll, vendor discounts, and generally making it easier to stay on top of your monthly budget.

Remember, we are all in business to do what we are passionate about. No one likes to worry with cash flow. I hope that you find some of my hints helpful and know that I am always here to partner with you to help with your cash flow pain points.

Among the top stories in the headlines for 2011 has been the realization/appreciation for the small business owner and what they do to help support our economy.  In an effort to support small business there has been a rise in lending to growing companies. As the credit crunch tightened lending options for small businesses, more small banks and non-banking institutions stepped in to assist. One of the fastest growing and easiest to work with financers is the accounts receivable factoring lender.

Accounts receivable financers, otherwise known as factors, purchase a company’s accounts receivables, at a discount, in order to provide them with working capital. Factoring provides financing to the business owner in the form of a cash advance (usually 75% – 85% of the purchase price of the invoices).

This form of non-traditional financing works well for small businesses due to the fact that many small business owners have little or no credit history, or need money more quickly than what normal bank processing can accommodate.

It is imperative for the small business owner to keep cash flowing.  Whether for making payroll, purchasing supplies, or whatever the day-to-day cash flow need is, a small business must keep cash flowing. It is in the best interest of a business owner, no matter the size of the business, to grow their business without adding debt. Having an accounts receivable financer on the small business owner’s team can only enhance cash flow and provide liquidity that will help the business grow. We at American Funding Solutions provide working capital for growing businesses and are excited to partner with and support small business owners in their efforts to grow their businesses.

With the ongoing financial challenges of the current economic climate, it is fairly obvious that entrepreneurs need to be financially savvy as well as creative in how they drive their businesses. The banking industry is tightening up their credit score standards and alternatives once available to the small business owner are no longer viable options.

Due to increased regulatory pressures, as well as an increasing number of foreclosures and related banking woes, fewer banks are in a position to assist small business owners in their quest for financial options to keep the cash flowing for the business owner. There is help in the form of accounts receivable financing for the small to medium sized business.

Accounts receivable financing, and other alternative financing options, are available through American Funding Solutions. We are a factoring business and we differ from a bank in many respects. A banker extends credit based on the financial condition and cash flow of the borrower. The borrower is expected to keep up with regular (usually monthly) payments to the bank… whether business is good or slow. Therefore, it is often required that the borrower meet certain financial requirements, including, but not limited to, a long, successful history of business with an acceptable cash flow history. These requirements are difficult for start-ups and certainly may prove difficult during the recent economic challenges we have been facing.

On the other hand, a factoring company does not require the client to demonstrate a proven history of profitability. As a rule, factoring companies are more interested in the credit history/financial strength of the client’s customers. If those that the client provides goods or services for are financially strong, then the factor can offer financing in the form of accounts receivable purchasing.

In other words, the factoring company views an invoice as an asset. The goods/services are delivered to the customer, the invoice is verified, and the advance is funded. Often times the transaction can be completed in a couple of days and the business owner can have the necessary cash to meet payroll, purchase supplies, pay rent, whatever is needed to keep the business’ cash flowing.

Factors often work hand in hand with banks. A business may have a working relationship with a banking institution and find that they suddenly have a need for additional working capital. Whether it is due to the sudden onset of the need or the fact that the client has a need that exceeds an existing line of credit, the banker can put the client in touch with a factor that can assist with a type of bridge financing that alleviates the crisis.

Factoring receivables is a great financing tool often utilized by small businesses. It provides a flexible, readily available financial tool to increase liquidity. We at American Funding Solutions are in business to provide working capital to growing businesses and we would like to help you sustain your business’ growth.