Companies need to maintain a steady cash flow to keep their businesses running and growing. Whether it is returning to business as usual after the schedule of summer, or something else, fall tends to be a busy season for most businesses. It is critical that the business is in a financial position that will allow them to supply the goods and services associated with an uptake in business.

Cash flow is key to any businesses success! If cash flow is tied up waiting for customers to pay, the ability for the business to keep moving forward can come to a screeching halt. Where does a small business turn if they cannot access they standard banking relationships for the cash necessary to keep the business operation going?

Receivables factoring is an ideal financial solution for new and emerging companies who lack a strong financial backing. Factoring allows the small business to leverage the financial strength of their customers rather than relying on their own credit worthiness.

Accounts receivable factoring can be used for either goods or services, but is only for business to business (B-2-B). Some examples of companies that can benefit from utilizing the financial tool of factoring are janitorial services, commercial landscaping companies, staffing firms, basically any small business that invoices their customers and then waits for payment.  In essence, factoring provides short term financing to the client using their invoices.   The factor provides the majority of the funds upfront for the invoice, and then collects the receivable from the customer, paying the client the balance, less an administrative fee. The process is very simple and most often takes less than 24 hours for turnaround.

Regular cash flow is critical to the success of any business. Unfortunately, with consumer confidence low, the jobless rate high, and the currently volatile political arena, the business market is faced with many challenges. It is increasingly difficult to obtain a traditional business loan.  This, coupled with the fact that business owners are finding it more difficult than ever to collect receivables, increases the challenges faced by the small business owner. Accounts receivable financing is an excellent option for the business owner looking to improve cash flow.

Accounts receivable factoring provides regular cash flow in addition to freeing up the resources spent on billing and collections. The process is very simple. The client follows their normal procedure of providing goods or services to their customers and then billing for those goods or services. They then sell the invoice (or debt owed them) to an accounts receivable financing company.  This process is completed by the client sending copies of their invoices to the financing company. That company then charges fees for administrative costs and provides the client with the necessary monies (usually within 24 hours) to meet their business financial needs. This option is a much more financially savvy alternative to the high interest rate credit cards that some small business owners have fallen back on. Invoice factoring helps the business avoid the need for business loans and eliminates collections, while improving cash flow and credit.  Furthermore, working with a factoring company allows the business owner to build the financial ‘track record’ they need to demonstrate their credit worthiness to later acquire traditional banking options.

In this difficult business atmosphere it is not at all uncommon for a company to wait for several months to receive customer payments. Many larger companies are taking as much as 90 days to pay their invoices. This leaves a small business in a very tenuous position; when working capital is needed to make payroll and cover the normal day-to-day costs associated with running a business. American Funding Solutions provides just such working capital to assist the business owner in growing their business. We work with many different markets; janitorial, fire suppression, and landscaping, just to name a few. It is our passion to help the small business owner grow their business successfully; we provide working capital to help grow businesses.

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.