Invoice factoring is a funding method that businesses use to free up cash to get through rough patches in cash flow or to grow and expand their business. To make the most out of it, check out the following tips:
You’ll need to assess your accounts receivable first and foremost. Know which of your customers have outstanding invoices, if they’re past due or not, and how much money your business has tied up in your accounts receivable. The most effective way to do this is to get and stay organized. Each of your customers should have a file (both paper and electronic is wise) that includes their credit application and anything you’ve sent to them. All payments made to your business should be entered your accounting system as soon as possible. This lets you to keep track of which invoices are outstanding, as well as gives you a general picture of when different customers are paying their invoices.
Have clear terms and conditions stated on every invoice.
Customers should see clearly stated terms and conditions. It’s also wise to have a contract signed between you and any customer you’re extending credit to. Additionally, if you make any changes to your terms and conditions, your customers should be notified and new contract should be drawn up.
Check the creditworthiness of all customers, new and old.
The creditworthiness of your customers is important, and should be looked into before extending any credit. What’s great about working with an invoice factoring company is that they typically will do this for you in addition to their factoring services. However, if you’d like to take doing this upon yourself prior to invoice factoring, be sure to check all of your customers. This includes your existing customers as well as any new ones.
Implement credit limits for new customers.
When extending credit to a new customer, introduce credit limits until you feel that they will pay on time without one. It’s important to be upfront about credit limits and their terms, as well as providing some information about how they can work towards larger limits.
Build relationships with all customers.
When you build relationships with your customers, personal connections are made. This could help encourage your customers to not do anything to jeopardize that relationship, such as making a late payment or not paying at all. A few ways to help build this relationship are to have your business’s social media pages follow theirs, send birthday or holiday wishes, or even a simple follow up email to see how they’re enjoying your services and if they need anything.
Use invoice factoring wisely.
With CoreFund Capital, you have the freedom to only factor invoices from the customers you want to. This allows you to have control over your finances. Invoice factoring can be a great solution to cash flow problems, such as meeting payroll or putting in that next order for materials.
Being smart about how you use invoice factoring can make a difference for your business. This service can get your business through a rough patch when cash flow isn’t that great or help your business grow and expand. If you’d like to find out more about how we can help your business, contact us today.