Get the Most from Your Accounts Receivable Financing

Companies seeking out tools to improve cash flow management in the face of unpredictable invoice payments from customers have a few tools to choose from, but there are really good reasons to make accounts receivable financing the staple resource. For starters, it’s a way to access your incoming money early, at least part of it. You can also predict the fees fairly reliably, making it possible to include them in your bottom line when sending quotes without undercutting your expected profits. That’s not all, though. If you optimize your process, you can also make this form of financing one of the cheapest sources of short-term capital you’ll find. So what does it take to make your invoice financing cost-efficient?

Finance Regularly

Setting a schedule for financing your invoices can be a little tricky at first, because you don’t necessarily want to file the paperwork for a cash advance application every single week. Especially since even the most efficient financing isn’t quite as low-cost as a customer sending a check directly to you. Setting regular, monthly cash advance application deadlines might wind up catching a few fresh invoices in their first couple days, but it also gives a fair number of your customers the opportunity to pay ahead of your financing. The regular pace of your financing guarantees a monthly sum of money for cash flow while giving the financing company a chance to really get to know your business and customers, which lets them fine-tune the amount available to you with each advance.

Finance All Your Receivables

The least expensive accounts receivable financing quotes come when you finance every invoice on your books at once and all your customers have great payment histories. It also helps if most of the invoices are relatively young, which is why a monthly pattern is a good idea. It guarantees every invoice will be less than 30 days old when it gets financed. You can find companies that let you pick and choose which invoices to finance, but it costs quite a bit more to get an advance that way. If you need to pick and choose like that because of a risk of nonpayment, think about factoring to get the invoices completely off your books instead of financing them for a cash advance. For customers who can generally count on payment from every customer, it’s a lot less expensive to finance invoices when you do them all at the same time.

Second Round Payments

When your customers pay on time or close enough to it to avoid penalty payments, there’s a bit of money left after the advance and fees are taken back out. When that happens, your accounts receivable financing company sends the money back to you. For many businesses, that second round payment is basically profit, since the day to day cash flow is handled with regular advances.

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