It’s not uncommon for a small business to experience cash flow problems. To remedy this issue, business owners often turn to invoice factoring Long Island. For those of you who may not be familiar with Invoice factoring, it allows you to ‘sell’ your outstanding invoices to factoring companies/lenders at a discount.
What’s helpful is, a business doesn’t have to wait for months before their invoices are paid. In fact, you can receive 85% of the total value of an invoice within 24 hours. Once your customers fully pay their invoices, you then receive the balance, minus a small fee.
Invoice Factoring Long Island: How It Solves Cash Flow Problems
Cash flow problems hinder your business’ growth and expansion. Without enough cash, you aren’t able to pay for daily business expenses, your suppliers, or other unexpected fees. Having a lack of cash flow can compromise your finance agreements, which can lead to debt accumulation.
Here are four of the most common cash flow issues a business can face:
1. Quick Business Growth
Entrepreneurs dream of growing and expanding their business, but when rapid growth occurs, it can actually do more harm than good. A sudden surge of sales or a single large order of goods with repayment terms of one to three months can become a source of problems that results in serious cash flow issues. However, by selling your invoices, you are able to free up the cash from your sales to support the steady growth of your business.
2. Delayed Payments
Unfortunately, delayed payments are one of the greatest hurdles a small business can face. In fact, 37% of businesses believe late payments are the single greatest reason for cash flow problems. Oftentimes, larger companies delay paying small suppliers, sometimes 60, 90, or even 120 days after payments are due. Fortunately, invoice factoring helps bridge accounts payable and accounts receivable so you can focus and apply your energy on operating and growing your business.
3. Poor Credit Control
One of the primary causes of cash flow problems stems from poor credit control. Small businesses usually don’t have the time and resources to conduct proper credit control and put in place an effective payment collections system. But failing to check your customers’ credit and regularly collect on debts can eventually cause you problems, including cash flow. With invoice factoring, the factoring companies take on the burden of your business’ credit control process. This lowers the risk of accumulating bad debt and it also provides you with the cash you need in order to continue to operate your business.
4. Long Lead Times
In the retail industry, business owners usually receive bulk orders on products, and payment terms are typically 30 to 60 days after the goods are delivered. Furthermore, if you manufacture your goods overseas, it can take six to eight weeks before you can ship the products. This means that it could take three to four months before your customers can pay your invoice. With invoice factoring, you can gain immediate access to funds once your invoices are issued. You then are free to continue to grow your business, as well as take on new orders from your customers.
If you want to discover exactly how and if invoice factoring Long Island, is right for you, the experts at SMB Compass can help you. Our team of finance specialists are here to answer all of your questions.