Getting Organized With Accounts Receivable Financing

If you run a business that invoices customers with payment terms such as 30, 60 or 90 days, managing your cash flow and staying organized can be difficult. Accounts receivable financing, also called factoring, can be a useful way to keep your business operations and your cash flow organized.

Getting Ready for Factoring

Typically, before being eligible for factoring, you will need to be able to provide a list of your customers, your outstanding invoices, your current invoices and your credit terms with each customer. These basic questions are to ensure that your accounts receivable portfolio is well-organized. If it currently isn’t, you should invest some time in getting it into better shape.

Update your customer files with their invoices and correspondences about payment. Make sure you have clearly documented payment terms with each customer. Also, maintain copies of all your invoices including their present payment status.

Factoring Will Help You Even More

Once you’ve organized your accounts receivable documentation, you may be eligible for financing your accounts receivable. This will help you to better organize your overall business operations. Your provider will buy your invoices from you at a discount then collect on them from your customer. It is a great way to ensure you always have the money you need, even when an invoice is not yet paid.

In a sense, factoring is like having your lender act as an outsourced accounts receivable department. They handle the collection of payment and can often be more focused and persistent that you, as a small business owner, are capable of. You’ll have a more predictable cash flow and your factoring company will make its margin on the discounted invoice. It’s a win-win.

Other Ways To Keep Receivables Organized

Typically, the best thing you can do to keep your business organized is to keep up with recordkeeping. The right software can help with this. Whenever you make a sale, send an invoice and keep a copy for yourself. Always keep your records updated on whether invoices are paid or not.

Similarly, set clear payment terms including what the policy for late payments is. You may be surprised by how often delayed payment arise from unclear communication. Clarity and organization go a long way toward well-managed cash flow.

Staying organized and using accounts receivable financing can help you ensure lasting and predictable growth for your business. Discover the benefits of factoring your invoices today and see what you could achieve.


Related Posts