Even a business with great sales and a strong bottom line can encounter cash flow challenges. That's especially true when a business is in its high growth stage.
Why cash flow can be challenging for your business...
The main reason that businesses will encounter cash flow problems is the disconnect between the time it needs to pay its production and operating expenses and the time it takes for customers to pay outstanding invoices. This disconnect in timelines is a standard in the way most Canadian and US companies conduct business. The key reasons are:
Most customers expect payment terms of 30, 45, 60 or sometimes 90 days. That's especially true for those ideal high-end customers and government contracts. In fact, many businesses find that they experience growth in sales by offering these types of payment terms to their ideal, creditworthy customers.
The cash flow challenges come about because the direct expenses incurred to fill orders with these ideal customers have to be paid in a shorter timeline. Can you imagine asking your staff to wait 60 days to get paid because those are the terms you've negotiated with your customer?
While it is possible (and recommended) for a business to negotiate longer payment terms with its vendors, the reality isÉsometimes those terms come with a cost. To stay competitive in today's market, a business needs to keep its costs under tight control. That means balancing that cost against the benefits of taking advantage of early payment or bulk purchase discounts from its vendors as much as possible. And, it takes cash flow to do that.
How factoring helps create ready, flexible cash flow...
Factoring services from reputable alternative financing companies, like Accutrac Capital Solutions, provide flexible, hassle-free cash flow solutions so you're no longer at the mercy of your customers' payment terms.
Qualification is based on the creditworthiness of your customers (and not your credit score or financial history). That means that even high growth companies, business start-ups and businesses in transition can qualify for factoringÉeven if they have trouble getting financing from traditional lenders.
Businesses simply sell their accounts receivable invoices from creditworthy customers to the factoring company at a discount in exchange for immediate cash to:
- Attract more customers by extending credit terms
- Take advantage of early payment and bulk purchase discounts from vendors
- Make payroll
- Pay operating expenses
For more information