7 Reasons to Factor Your Invoices
A common question regarding any service is “why would I pay someone when I can do it myself?”
It’s important to understand the relief of allowing a factoring company to not only pay you right after the load has been delivered, but also to handle the back-office craziness for you. This includes deeper credit research on your customers (brokers and shippers), billing, and collections.
While the average time for brokers and shippers to pay is 30-45 days, about 60% of all invoices are paid late. When you submit your invoices to the factoring company, you will receive your payment same day or next day. After that, the factoring company deals with the responsibility of collecting… so you don’t have to.
Let’s take a look at 7 ways factoring improves your business and can help you grow to the next level:
- Instant Cash Flow
This seems obvious but it’s true. Waiting on your receivable to pay 30 to 60 days (or longer!) can lead to cash flow issues. Factoring gets you the funds right away allowing you to add staff, purchase equipment, pay insurance, and cover all the other necessary business expenses.
- Grow Faster
Factoring can assist in growing your company faster than if it were backed by a traditional loan. You are able to get factoring set up and working for you within a very short amount of time and let your factoring account grow with your company expansion.
- Additional Services
Your factoring company can free up your time as they will handle the collection and follow up with your customers to ensure payment of the full invoice.
- Experience (in trucking)
Having a factoring company that has experience in your specific field can be important to better understand your industry. Not just general business.
- Quality Customer Relationships
As the owners of the business, you will have to press a little harder sometimes when it comes to collecting on outstanding invoices from customers. By handing that responsibility over to your factoring company, it allows you to retain a stronger, positive working relationship while someone else does the collecting.
- No Debt
One of the greatest reasons invoice factoring is a prime option is because no debt is created. You are simply leveraging the collection of future invoices. This increases your cash balance and reduces your receivable balance. No loans to repay.
- Tools & Resources
There are very useful tools that many businesses capitalize on when partnering with a factoring company. Online credit checking allows you to ensure you are working with quality brokers and shippers. A partnered fuel card gives you the best discounts in the market. Factoring companies will generally have a solid network of insurance agents, dispatchers, and other useful resources to make the setup and day-to-day operations that much easier.
Remember to think beyond the factoring rate. What is the true value of that rate? Think about how an invoice factoring company can help make running a business each day more fluid.
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