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Make Factoring Number One on Your Recession Planning List

By: Kris Koonar

Recession and a credit crunch have hit every market and many businesses are facing a tough time dealing with the situation. It is important for businesses big or small to draw up a plan to overcome these times. One very useful tool to recession proof your business is by factoring invoices that you have in hand. You are sure to feel the pinch with payments trickling in and increasing costs. In these circumstances, factoring should be top of your agenda.

During a credit crunch your cash flow needs to be managed extremely carefully. Monitor it regularly with a substantial amount set aside for at least 3 months. You may have big customers but your payment terms flexible. To add to that your customer may pay up later than the stipulated period. Your need for capital does not diminish. There would be certain payments that you cannot forgo or postpone. You require funds to take care of rent, taxes, bills and overheads. Factoring can be of great use to you if you have an important asset in your hand. That asset is the invoice receivables that you have in hand. You can sell them off to the factoring companies for a small fee. Depending upon your cash requirements you can choose to sell your invoices to the factoring companies. Factoring companies may pay you an advance of even 85% to 90% depending upon certain factors.

It is important for you to have a steady flow of working capital and therefore necessary to beef up collections. However, in tough times that will be limited. By factoring your invoices you get the cash you urgently require. This is useful to make prompt payments, which can help get you better trade discounts. You should keep a check on your creditors and stretch them sensibly without hampering your cash flow or loosing out on good discounts unnecessarily.

You cannot depend on you bank for your funds and more so if yours is a small business. It takes a lot of time to get loans and can be expensive. Similarly, banks may or may not give you loans if your credit scores are low. In such instances, if you have a big invoice from some credit worthy customer you can get funds from a factoring company with ease. For them your credit scores are not as important as those of your customers. You can get funds in a matter of 48 hours once you have established a good relationship with the company. Another advantage is that you can also bring some discipline to your financial matters. You can plan on what invoices to use and when as per the need. You need not sell out all in one go and then have nothing left in hand. You can ensure that your finances are well managed and planned well in advance.

With the enumerable advantages that factoring has to offer, keep it on top of your list to counter the recession. Planning in time will help you tide through these tough times.

Article Source: http://www.bluearticles.com


Freight Bill Factoring with the best rates and service. Current factoring rates can be found here: http://www.phoenixcapitalgroup.com

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