“I’m able to push the price onto my buyers”. “I don’t want to worry about having enough money in my account for repayments”. “I don’t want to worry about collections”. Seeing their responses in their own words will give you more insight into recommending a funding option. Here are a few use cases directly from owners for each type of invoice funding. So which funding option is the right one? Chances are, the answer is both.įactoring and financing help small businesses in different ways and in different situations. In these situations, bookkeepers and accountants have said they can be a hero to their clients by recommending invoice funding. Not only can it seem like a difficult problem to solve, it takes their attention away from the important work of serving their customers and growing their companies. Business owners are stressed when they need better cash flow. Getting back to why business owners fund invoices, those are all the logical reasons, but they’re not the only reasons. It’s a fact that you need cash to grow your business. Or to ramp up production and service when your client gets a big break and the bookings are rolling in. But it can also be used to fulfill major orders or projects from large customers. Simply put, invoice funding can certainly help business owners make payroll, pay suppliers, and handle an emergency. Because they often have lower, less established cash flow, it’s harder to ensure there’s enough cash coming into their business bank account to compensate for what’s going out – and that’s not even taking into account cash needed to grow. This happens in businesses of all sizes and across industries, but it’s especially tough on small businesses. On the surface, it seems obvious: B2B customers demand invoices with long payment terms, creating a delay for business owners who need cash, not another account receivable. Next, looking at why business owners fund invoices at all will give you more context when weighing all the options for helping your client boost their cash flow. Monitoring your bank balance is simply a consideration to be aware of. That last point isn’t a discouragement to finance invoices in many cases it’s the right choice. (However, a good factoring company will only contact your client’s customer with your client’s knowledge). Additionally, the factoring company takes on the work of handling any accounts receivable. When they factor invoices, they don’t have to keep an eye on their bank account because the fee has already been withheld from the advance. When business owners finance invoices, they have to make sure cash is available whenever a payment is due to the factoring company. With financing, their customer isn’t involved. With factoring, your client’s customer is involved because they have to redirect payment. 
(In both cases the customer is only obligated to pay according to the due date of the invoice it’s who they are paying that is different). The business owner’s customer pays the business directly as they normally would for a financed invoice. The business owner’s customer redirects payment to the factoring company when an invoice is factored.
Oftentimes, large invoices are recommended for factoring, small invoices are recommended for financing. With financing, a portion of the fee is added on to each repayment. With factoring, the fee is withheld from the advance before it lands in your client’s bank account. As you’ll see, some of the differences are obvious and some less so: Like many things, the true differences are in the details.įor both factoring and financing, your client receives cash for your invoice way ahead of 30 to 120 day invoice payment terms common for B2B businesses. Understanding the definitions is just the first step to choosing the right invoice funding option.
0 kommentar(er)
