For busy manufacturers, it only takes one customer who is late with payments to set in motion a cycle of decreased cash flow that can preclude the timely payment of salaries, suppliers, bills, rent, and other business expenses.
Companies that are relatively new or ones without a solid credit history don’t always have the luxury of obtaining a line of credit or a business loan from a traditional financial institution. An alternative to getting credit from traditional lenders or credit cards is invoice factoring, a solution that a growing number of manufacturers are turning to. Invoice factoring, which is offered by companies like Dilato Point Capital, is quick, flexible and particularly applicable to those selling business-to-business.
How Factoring Works:
Invoice or accounts receivable factoring enables a company to obtain ongoing advances against outstanding invoices. The advance rate and discount fee is determined by your monthly invoice volume, the credit quality of the customers that they sell to, the diversity of customers, and the specific industry.
With factoring, a business can get paid in a matter of hours, instead of weeks or months. With cash in hand, it becomes much easier to financially sustain daily operations while also having the necessary capital for future growth.
The Benefits of Factoring:
In addition to getting paid in a more timely fashion, there also are benefits that factoring offers to manufacturers, including the ability to offer payment terms to larger companies customers and to take larger orders. Factoring also reduces operational cost and overhead for processing invoices, collections, depositing checks, and the time needed to follow up with late-paying customers. Because revenue becomes more consistent, paying bills and other expenses also becomes much more manageable, which ultimately leads to better credit ratings with suppliers, vendors, and financial institutions.
Focus on Making Money Instead of Collecting It:
With factoring, faster collection times eliminate the waiting for invoices to be paid and the follow-up when those checks don’t arrive. In a competitive marketplace, manufacturers are often working with slim profit margins and high customer expectations. Factoring provides a distinct competitive advantage to those who choose to leverage its benefits. By getting paid faster and more consistently, the ability to focus on money-making activities and planning for strategic growth is that much easier.
Factoring is a financial tool that can be used at nearly every stage of a manufacturer’s life cycle, and it has been a key component of many companies’ growth and success. With available cash, a manufacturer will always have an advantage over the one that is waiting to get paid.