Staying Solvent Through Accounts Receivable Factoring

Some businesses receive payment in full at the moment that goods transfer to customers. Consumable goods (think restaurants, grocery stores or gas stations) are examples of immediate pay business models. On the other hand many service-related businesses (dentist, doctor, medical procedures) and higher priced dry goods retailers (electronics or auto sales) may allow 90 days or longer for customers to clear their invoice.

What happens when the customer takes even longer than the agreed-on terms to pay? The truth is that even businesses which don’t invoice their customers often deal with suppliers and other B2B relationships where slow payment can create problems. Retailers may need to agree to payment terms with suppliers in order to get the best wholesale cost. But when customers or business partners are slow to pay, you wind up with bloated receivables and unhealthy cash flow which could negatively impact your operational ability.

If your business is being adversely affected by sluggish accounts receivable there is something you can do to make sure you have the ready cash needed for day-to-day operations – accounts receivable factoring. Accounts receivable factoring involves working with a third party who essentially buys your accounts receivable for a fee. You receive the lion’s share of the invoice immediately to keep cash flow steady. The remainder comes to you after the bill is collected minus the third party charge.

The accounts receivable factoring company doesn’t purchase any and every invoice – only those who pass a basic credit background investigation. In some cases, the company may help you run these credit checks before you engage in a contract relationship. But if waiting on payment is already interfering with your daily operations, then factoring could be the answer. Factoring will provide you with a much-needed injection of quick cash so that your business doesn’t come to a grinding halt while you wait for customers and partners to pay.

So if you’d rather spend your days engaged in your business rather than trying to convince slow payers to meet their responsibility, partnering with someone else can move this unpleasant chore off of your plate. You don’t have to run down the late-paying clients and you do get the cash you need. If you sell your accounts receivables you can focus on what you do best, growing your business. Companies like UGA offer several collaborative solutions to your business financing and loan servicing challenges that can help you cash flow remain strong.