A consistent cash flow is essential to sustain any costs, cost increases and overhead expenses for any type of food manufacturing business. The food and beverage industry know all too well the issues that can be faced with managing cash flow when it comes to day-to-day operations. One of the most common problems that is faced every day by food and beverage companies is having unpaid invoices, with long duration payment terms. Resolutions to this issue, such as invoice factoring, are crucial to understand to keep your business on track and growing.
Factoring for food and beverage explained
Invoice factoring for your food and beverage company allows you to have consistent working capital. All while waiting for invoices to be paid. To summarize what invoice factoring is: You invoice your customer, and you then sell those invoices to a factoring company. Factors typically advance between 70-90% of the total invoice value, giving you access to your working capital within days. You remain in control of your business and customers; the difference is that your customer simply makes payments to the factoring company instead.
Why factoring is a good option for food and beverage companies
Food and beverage companies can struggle to maintain a solid cash flow. You try to meet demands, cover operating costs, payroll deadlines and more. Fortunately, factoring can be beneficial for resolving this issue. Not only can factoring your invoices allow you to comfortably stay on track, but it can also help grow your business. Having your capital readily available for you on demand in exchange for selling an invoice, can allow you to invest more in your food and beverage business. You can use that working capital to market and advertise your business or invest in additional inventory. Furthermore, it can be used for purchasing more technology, better equipment, higher quality products and more. All these examples can take your company to the next level without having to wait for invoice payments.
What type of company should factor their invoices?
Essentially, any type of food and beverage company should consider looking into invoice factoring. Whether you are working with seafood, meat, dairy, fruits, and vegetables, etc., it can benefit your business in different ways. Having that cash in your hand gives you the opportunity to focus on working on your business and bringing more food to the market. Nevertheless, make sure to do all the research necessary. This will help you determine whether invoice factoring is right for your business. Furthermore, what to be aware of when choosing a factor.