by Curtis Sutherland, VP Accounts Receivable
When your business makes the decision to use invoice factoring, it taps into a valuable line of secured credit that uses a unique resource as collateral: existing unpaid invoices held by your company. While you've already made the sale or completed the service that led to the invoice's issuance, you haven't yet collected - and may not for weeks or even months to come.
Invoice factoring offers your organization the chance to tap into the money owed to you now, offering benefits ranging from addressing an unpredictable emergency to taking advantage of a potentially lucrative business opportunity. As you ponder how your company can use invoice factoring to its advantage, keep these tips for developing financial stability with those additional funds in mind.
A major, unforeseeable breakdown of equipment or building damage not covered by insurance is enough to put many companies in danger of closing. You have invoice factoring on your side, which gives you the quickly accessible funds needed to address the problem without delay and get your business back into a position where it's operating at full capacity.
To make sure you can avoid, or at least mitigate, such issues in the future, start setting aside some profit as part of an emergency fund. The next time an unexpected issue arises, you'll be in an even better position to handle it. And if you still need cash, you can keep using invoice factoring to make sure all the bills are covered.
Whether it's vehicles that operate more efficiently and offer many years of service, powerful production line equipment or something else entirely, there are many ways in which you could improve your operations by acquiring new equipment. Invoice factoring gives you the option of getting funding fast and putting it toward such upgrades. You can use several invoices at once to receive the amount of capital needed to make a major purchase, thereby avoiding having to pay interest and other complications.
As long as you can be sure the purchase makes good financial sense, you can use your line of credit to fund these new additions, which can ultimately lead to benefits ranging from increased output to lowered maintenance costs.
Whether it's bidding on an especially valuable contract or expanding operations into a related but more lucrative field, there are many ways businesses can take steps to improve profitability. When special equipment is needed to bid on that contract or a new piece of machinery has to be in place before expansion can happen, however, many business owners can feel stuck. Without the funding to get the necessary assets in place, it's difficult, if not impossible, to act on these opportunities.
Invoice factoring allows businesses to get the money they need, when they need it. Weeks or months of waiting for payment turns into just a few hours or days before receiving the line of credit. In terms of finding and taking advantage of growth opportunities that funding can make a world of difference.
Businesses that have strong long-term outlooks and overall sales can still face short-term issues if revenue from one month to the next is uneven or increased costs in a given time period reduce income. While your company should be fine in the coming months or years, the problems it faces in the coming days or weeks could cause major problems with paying bills, acquiring raw materials, marketing, hiring new staff and many other obligations. That's true even when many invoices sit unpaid in the accounts receivable department.
Invoice factoring gives businesses this valuable cash with minimal delays, providing a bridge that helps them cross over with shorter periods of trouble and regain solid footing on the other side. To learn more about the advantages of entering into an invoice factoring relationship with TAB Bank, get in touch with us today.
About the AuthorFollow on Linkedin More Content by Curtis Sutherland