Protecting Yourself from Your Customer’s Problems
How to maintain your cashflow and protect yourself against bad debt
Securing customers is an integral part to the life of any small business. Without customers you’ll be unable to sell your products or services, spelling financial trouble for your enterprise. But securing your customers is only half the battle.Once you have them in place you need them to pay. You can invoice them but you can’t always legislate for your customer’s financial position. A client’s insolvency or inability to pay is a huge issue which could really affect the viability of your business.
To maintain your cashflow and protect yourself against bad debt, it’s vital that you investigate leading debt factoring solutions and choose an option that fits in with the needs of your business.
How does factoring work?
It’s all very simple. Once you’ve chosen a specific factoring agent all you need to do is send your invoice to both your customer and the factoring agent. The agent will pay you a high percentage of the value of the invoice (often 85%) within a short period of time (in most instances 24 hours).
This will provide you with instant access to the cash you need to run your business. Once the customer pays the invoice to the factoring agent you’ll receive the remaining percentage (minus the agent’s fees).
If you have specific business funding needs you can also find a package that is tailored to your specific needs. For example many agents also offer credit control and sales ledger management as part of the factoring service. By moving the process of chasing invoices and collecting payments onto an outside agent you can free up your own time to get back to the day to day running of your business.
What are the benefits to my business?
Clearly one of the biggest benefits of choosing a factoring solution is that you’ll receive a high percentage of the value of the invoice within a short space of time. Being provided with a guarantee of funds on your outstanding invoices this enables you to negotiate with your suppliers and make plans for the future without worrying about late payments.
Opting for a solution whereby the agent handles both your credit control and manages your sales ledger with also free up management time enabling you to concentrate on other areas of your operation.
With certain factoring packages you’ll also be provided with protection against your customers who become insolvent or who are unable to pay, giving you the peace of mind to expand your business.