If you run your own business, no matter the size, then you know how frustrating it can be when you send an invoice to a client and have to wait months for them to pay you. This can be a problem if you need to cover an operating expense or require liquid capital for an exciting business opportunity. An invoice factoring service can help smooth out your cash flow and ensure you have funds available to handle the ups and downs of running a business.
What Is Invoice Factoring
Invoice factoring is the process of selling an outstanding client debt to an invoice factoring service, that will then provide you up to 90% of the total bill within a few days, in cash, and will then collect the debt from your client.
When your client provides the total amount, the invoice factoring service provides the remainder of the total bill, with a small percentage taken out, typically no more than 1% or 5%. Because this is a sales transaction, there is no impact on your credit score.
Invoice Factoring vs. Invoice Financing
The two services are similar, but have a few fundamental differences that can make your life as a business owner easier, and that’s regarding who handles the hassle of collecting the payment from your client. Traditional invoice financing is done by your business, but with invoice factoring, an invoice factoring service takes care of the collections for you.
Invoice financing involves taking out a loan against the cost of the customer’s debt in order to receive cash, and this can be as low as 70% of the total payment given to you upfront. Using an invoice factoring service offers more cash up front and it won’t impact your credit.
When combined with e-invoicing, invoice factoring can reduce the overhead costs associated with business administration by saving you more than invoice financing money, and most importantly, time, so that you can focus on growing your business.
A Great Fit For Small Business
Building a business can be difficult, but that’s why the flexibility offered by an invoice factoring service can help you. Cash flow is the lifeblood of your business so you may not be able to afford to wait months for a client to pay you. For these small businesses in particular, invoice factoring can help make the difference between acquiring debt and growing:
Janitorial And Commercial Cleaning
Supplies cost money, and if you have to wait months for a client to pay their invoice, that is cash you can’t use towards your next job. Invoice factoring reduces the need to take on more operating expenses and lets you provide every customer exceptional service.
Temp And Skilled Labor Placement
Providing staff for other businesses can be lucrative, but it’s a fast-moving industry and you may only have days, or hours, to respond to a new client looking for labor. An improved and streamlined cashflow can make the difference between landing your next client or having to say no because you can’t afford the placement.
Freight Transportation
Hauling freight keeps other businesses running, but it’s also capital-intensive and when running a B2B company, you are at the mercy of those 30-to-90 invoice payment windows. By signing up with an invoice factor service the trucks can keep moving and the cost of fuel won’t drive you into debt.
Security
Reliable service for your clients shouldn’t be thrown off by waiting for an invoice to clear, which is why security companies are an ideal fit for an invoice factoring service. Unexpected overtime for employees can result in extra charges, but with extra cash on hand thanks to being paid faster, even those bumps in the road can be easily managed.
Information Technology
Few industries move as fast as Information Technology, which is why waiting for an invoice to be filled by even 30 days can be the difference between profitability and struggling to make rent. Partnering with an invoice factoring service lets you move faster than your competitors and land those client deliverables on time.
Get Started With Invoice Factoring
Your first step in incorporating invoice factoring with your successful business is to sign up for an invoice factoring service. The approval process is simple and straightforward, and all you need to provide is your business information, including a bank account and Tax ID number, along with your list of creditworthy clientele.
Once the application is approved, you can worry less about cash flow and more about growing your business. Time is a precious resource for every entrepreneur, so make better use of your by partnering with an invoice factoring service.
