A huge issue many companies face is not receiving payments on invoices in a timely manner. This is a threat to your business and your working capital, as late payments can negatively affect your cash flow. Fortunately, there are a couple ways to try to prevent late payments.
Giving your customers flexibility when accepting payments may get you paid quicker. Offering multiple forms such as credit card, cash, bank transfers, and mobile pay gives your customers options. In return, it should make the entire process faster and easier for them, allowing payments to smoothly come in.
Offer flexible payment methods to customers for faster compensation.
If you send out your invoices on a specific date every month, it may be more beneficial for you to send out invoices as soon as possible. Try to send out invoices according to the terms agreed upon in the contract, or as soon as the task has been completed. If you find that to be burdensome, consider automating your invoices. To automate your invoices, businesses use a software to create an invoice template that can be used multiple times. With this software, once a new invoice is sent over, the information will be entered in the template and scheduled to be delivered. By automating your invoices, you save time by not having to prepare every invoice manually. Release these automated invoices as soon as possible, then follow up with your customers to ensure for a smooth transaction process to promote business growth.
The faster your clients get their invoices paid, the better. Without any benefit or reward for early payments, they may not feel inclined to pay earlier. Even a small 1-3% discount on the invoice total for payments made 10-15 days before it is due allow invoices to be fulfilled faster. This incentive can be offered to give thanks to your customers who make paying a priority and it can also help you build stronger relationships with clients.
Overall, dealing with invoices can be a bit inconvenient and troublesome. Try to implement these techniques to make the process easier. You may also want to consider selling your invoices to a factoring company for a small fee, and they will deal with your customers’ invoices directly. If you are in need of working capital fast, this option can be beneficial for you. You may receive a large percentage of the invoice total within days. Instead of waiting for the invoice to be paid. You will also have the added benefit of having the factoring company become your back office. By monitoring your accounts receivable to assist you in ensuring timely payment.
Invoice factoring makes it possible for your business to receive money that is owed to you now, rather than having to wait for invoices to be paid. A factoring company enables this by purchasing your business’s unpaid invoices at a discounted rate and receiving those payments from your clients directly. As a result, it is important for you to understand what to look for when choosing a factoring company for your business. Here are some questions and options you may want to consider.
The application process for invoice factoring is typically fast and simple. Contrary to the tedious process of applying for a traditional bank loan. A factoring company performs most of the application process. You just need to submit certain documentation along with the application for funding.
Factoring companies will also review the invoices you are seeking to factor, your business bank account, an accounts receivable aging report, prior collections history, as well as some other documents for personal identification purposes. This part of the process is referred to as underwriting.
A factoring company will review your application. Once reviewed, you may be approved for funding, This will likely be within twenty-four hours or less. Next, once the transaction is approved the contractual documentation must be signed. Funding should be available to your company within days. Make sure to choose a factoring company offering a quick application process. If you need working capital fast, this is beneficial.
The invoice factoring application process should be fast and flexible.
Factoring rates are highly dependent on the firm you choose. Therefore, you should evaluate how much you wish to pay, and how often. Depending on the company, they may either calculate costs on a daily, weekly, or monthly basis or charge you a one-time flat fee. Factoring fees tend to fall between 1% and 5% of the total invoice amount. However, some companies will offer you different rates for different customers. You may negotiate terms with a factoring company and can compare options to ensure you are receiving the best terms possible. Questions for the factoring company to consider should involve the fee structure, current rates, advance amounts, and whether there will be any personal guarantees involved. Asking the right questions will allow you to be more prepared when speaking to or researching a factoring company.
Since the factoring company is taking ownership of your invoices, they will need to communicate with your customers directly. Forming professional relationships with your customers allows for a smoother collections process and establishes a mutual relationship between the factoring company and the customer. Therefore, it is important to research how businesses handle their customers. Be sure to read feedback from real customers to find out about their policies and how they communicate. At CapFlow Funding, customers are informed in three different ways about making payment on factored invoices– through a notice of assignment, direct verification usually via email, and by information regarding the factoring company that is provided right on the invoice.
Ensure you have clear communication between you, the factoring company, and your customers.
Take the time to conduct research on the factoring company’s policies and procedures and find a factoring company whose ideals and basic principles line up with yours. You should also read reviews and feedback from previous or current clients of the factoring company you are looking to do business with. Do not settle for a company that will not meet your expectations.
