Your Pricing Strategy Affects Trade Receivables Financing

If you’re in need of some quick cash infusion for your own business, you may want to think about accounts receivable factoring instead of applying for a bank loan. Factoring is a form of trade receivables financing. You get an advance on the value of your invoices, which you can then use right away as working capital. Small business factoring companies can offer you as much as 80% of the value of an invoice, and then charge you a very small percentage as fee for the advance.

Since your funding relies on the value of your accounts receivable, you really need to make sure that you’re pricing your products and services correctly. But how do you determine the right price for goods and services? Here are some pricing strategies you may want to think about.

Cost-Based Pricing

In any business, you earn money when you receive more money than what you spend. This is also the very essence of cost-based pricing. You take note of how much you spend in manufacturing a product or providing a service, and then you add a nice profit margin for yourself when you set a price for what you offer.

The key here is to be very aware of how much you actually spend on costs. Maybe you spent money on research and development. You also have to take note of various ordinary expenses such as rent and utilities, as well as supplies and equipment you need for your work. Payroll has to be considered too. Even after you’ve manufactured your product, you will also have to consider just how much money you will spend on advertising to promote that product.

This is a great way to price things—if you offer a product or service that the consumer base wants.

Competition-Based or Industry Standard Pricing

Here you look at the prices normally charged by your competitors and then you determine your own prices based on those figures. Normally this means you price your products lower so that you can brag that you offer more affordable goods and products. This is actually a very easy way to get the attention of many prospective consumers.

The problem here is that you still need to think about your own costs so you don’t end up losing for each sale. If you’re spending a total of $1,000 to create a single doodad, then offering it for $9o0 means you’re selling it at a loss. Some large corporations can absorb this kind of loss because they just want to grab market share and make a brand more popular, but for a small business this can be a problem.

Customer-Based Pricing

When there’s a great demand for a product, you can raise prices in order to gain more profit. There may even be a boost in your brand’s image. Many people see the price tag as proof of quality. If they see that something is expensive, then they automatically think that it must be good. Many exclusive universities set their tuition this way, as a way to discourage more than 75% of their applicants. Luxury bags use this type of pricing too.

Whatever pricing strategy you use, just keep in mind that it will affect your trade receivables financing as well!

Are You Always In Search of Staffing Direct Lenders? Maybe You Need To Be A Better Manager

Running a staffing agency can be a complicated business, and it seems like you always need more cash to cover payroll, supplies, and advertising. If you’re always looking for staffing direct lenders because your customer stopped using your agency or refused to pay for shoddy services, your problem may not be in your choice of workers. Maybe you just need to be a better manager.

How do you know that you’re not quite the staffing agency manager you ought to be? Here are some signs you need to watch out for:

  • You don’t really have in-depth knowledge of every aspect of your business. Just because you took some business classes in your local college and you think that you know the “ins and outs” of staffing companies doesn’t automatically make you a great manager. And it surely doesn’t help if you don’t know about the service side of things.

So you have to know what your people know, or at the very least you learn some things about the work. If your staffing agency hires IT people, then you have to be conversant in IT topics as well. If you’re offering office cleaning services or lawn care services, then you should be aware of basic cleaning or lawn care methods.

  • You’re exempted from your own rules. You need to be part of the team, so the rules that apply to your own people have to apply to you. If you require your janitorial services to wear a uniform while on duty, then when you visit the cleaning sites you have to wear the uniform as well. If you insist that your IT people wear shirts and ties and have short haircuts, then you should also wear a shirt and a tie and have short hair as well.

You’re a manager and not a parent. You can’t just tell your people to do as you say. You have to lead by example.

  • You don’t treat everyone equally. You may think that having favorites is a good thing, but for a staffing company that can really poison the entire workforce. Having obvious favorites (and it will be obvious) can really damage company morale. It makes you look unprofessional and resentment can build up that can discourage your workers from doing their best.

So avoid having favorites and don’t treat people differently because of their gender or skin color. You can like some people more than others, which is only natural, but you have to act professionally and treat everyone fairly.

  • You like to manage everything. Such a tendency is called micromanagement, and it can send everyone working for you on the edge. You have to trust your people to do their work, and it’s best to just leave them if they’re doing their job ably enough.
  • You keep having useless meetings. Make sure that your meetings are actually useful. Often meetings are a big waste of time, so don’t schedule too many meetings just for the sake of having meetings.

Improve you managerial skills, and you may find yourself holding on to your customers because of the improved work quality of your people. Then perhaps your customers will pay on time, and you won’t need staffing direct lenders as often.

Trying to Get a Staffing Company Loan? Find Out Why Your Business Credit Rating May Be Too Low

When you’re running your own staffing company, it’s common to run out of working capital to cover payroll especially when you have lots of new clients. Sooner or later you’re going to need a staffing company loan. But you may not get the loan you need if your business credit rating is too low to qualify. This is the reason why small business factoring invoice for funding has become more popular, as your credit doesn’t matter as much as the creditworthiness of your customers.

When you’re trying to secure a loan, your business credit standing is crucial. What you may not know is that you may be inadvertently contributing to the low business credit score. Here are some possible mistakes you may be committing:

  1. You only depend on personal credit. It’s understandable to use personal savings and credit cards to start a business. But as soon as possible, you need to open one or two business credit cards. It has to be in the company’s name. While the credit line may not be large at first, what you’re really trying to do is establish a credit worthy profile. When you build your business credit, you increase your chances of getting a loan for your company in the future.
  2. You don’t regularly monitor your business credit. With so many hackers and identity thieves operating these days, you should really keep a constant eye out on your business credit. You can’t just check it when you need it, such as when it’s time to borrow money. Credit scores don’t really fluctuate wildly, so you can be notified right away when your credit score suddenly drops. You can then take measures to deal with the problem right away.

Monitoring your credit doesn’t have to be too much trouble for you. There are some monitoring tools you can use which will alert you when your credit score changes and some of these tools are even free to use.

  1. You don’t check for factual mistakes. It may surprise you to find out that a significant number of small business owners have discovered mistakes in their credit reports. One report published in the Wall Street Journal revealed that of the businesses that checked their credit reports, fully a quarter of them found errors or missed financial data that made them seem riskier to lend to.

So when you get your credit reports from credit bureaus, take some time to review the data to see that it doesn’t have any mistakes that damage your credit score. Check that the revenue figures are up to date, and your company is in the right industry classification code.

  1. You don’t pay your bills on time. For a business, paying late can have serious consequences. While you may think nothing of paying a day late in your personal life, in business paying late for just one day can adversely affect your credit score. So don’t pay late. Better yet, pay early because doing so may actually increase your credit score!

Your business credit is just one factor that will be checked when you apply for a staffing company loan. But having a very low business credit score may be enough for you to fail in getting the funding you need.

What’s Not Covered in a Typical Non-Recourse Factoring?

In factoring, you get an advance on the value of an invoice so you won’t have to wait 30 days or more to get the money you can use as capital for your business. Small business factoring companies may advance you as much as 75 to 85 percent of the value specified in your accounts receivable. If your customer doesn’t pay, then eventually you’ll have to give back that advance. But in non-recourse factoring, you don’t have to.

Of course, it depends on the reason why your customer doesn’t pay. The typical non-recourse factoring may only cover non-payment due to bankruptcy. And that may even have a time frame involved—if bankruptcy occurs after 90 days from when the factoring company buys the invoice then it may not be covered by the factoring agreement at all.

Obviously, there are many other possible reasons why a customer won’t pay up:

  • You breached the contract. Usually, you have an agreement with your customer about what you’re supposed to provide. Perhaps you were contracted to provide 100 doodads at a specific date. But maybe you only delivered 90 doodads, or perhaps you provided the service or products a few days later than what was specified in your agreement.

Now the person you dealt with may have grudgingly accepted your products, but afterwards someone higher up in the company hierarchy may have decided not to pay you at all because you breached the contract.

  • Your customer doesn’t think that you provided the quality of service they expected. This situation is a bit more problematic. When quality is at the heart of the issue, it can be very difficult to quantify, which is why you really need to have a clear and concise contract with your customers so they cannot claim this sort of thing.

This usually happens when you provide a service. For example, if you provide janitorial services a customer may be unhappy with how dirty their office remains even after your janitors did their work. The customer may be so unhappy that not only will they stop hiring you, but they may also refuse to pay for the work your janitors renderred.

  • Your customer may simply have decided to breach their agreement with you and refuse to pay. These things do happen. You just have to deal with non-paying customers the best you can. You may start with a non-threatening letter, and then when that doesn’t work you will need to be firmer in your tone.

You may end up having to threaten them with the option of bringing in a collector. That may seriously damage your relationship with your customer, although you may argue that they started the damage by refusing to pay.

And if you bring in a collector or a debt buyer, you should be prepared for collecting less than what was owed to you. Collectors may ask up to 40% of what they collect, and they may collect less than the amount owed. Debt buyers take over your account completely, but they may only pay a small fraction of the amount owed.

If any of these situations occur, the typical result even with a non-recourse factoring agreement is that you’d need to return the money you got as an advance.

What Can You Do With the Money You Receive from Factoring Your Accounts Receivable?

For companies across numerous industries, they don’t get paid immediately for their products and services. Often, the client is another company, which is why you’re giving them a credit term. So you’re left with having to wait 30, 60, and in some cases even 90 days before you’re paid in full. But that’s the wait you avoid by factoring accounts receivable.

This is the main advantage of account receivable factoring. In factoring you get most of the money right away, and you get the rest when the customer pays in full.

Here are some ways which may want to use the money you get from factoring:

  • Cover payroll. This is a huge benefit, because many small businesses can really fail once they start missing payroll and fail to pay their people on time. Employees then start looking for work elsewhere, and work performance suffers because of morale issues.

In many cases, payroll could have been met had your clients paid right away. And that’s what factoring does. You can then cover payroll so you can keep your people satisfied and working at their best.

  • Pay bills. If you have a business, often you have to pay for a lot of things to keep your operations running. You have to cover the rent for the office, and you have to pay for utilities as well. Then of course there’s the monthly payment for all your expensive equipment. You may also need to buy some other equipment on a daily or weekly basis.

If you can’t pay your bills, your business may grind to an absolute standstill. You simply can’t allow that to happen which is often why you need money right away instead of waiting for 30 or 60 days. You have to pay all these bills on time, and with the advance money you get from the factoring companies you can do so with a huge sense of relief.

  • Invest in marketing. There’s no point in selling the best products and services in your industry if no one knows you exist at all. It’s not enough that you offer the best. You have to spread word about it, and you need to convince people that you do offer the best. That’s what marketing and advertising is all about.

Competing for customers can be tough, so you can’t relax. That’s why quite a lot of companies use a large chunk of their capital in marketing so that they can get more customers. The more customers you can bring in, the higher your revenue.

  • Take advantage of supplier discounts. This is math at its simplest. Sometimes the cost of factoring may be less than what you gain when you take advantage of supplier discounts when you pay them early.

There are many things you can do when you consider factoring accounts receivable. That’s the point of factoring—to help improve your business.

How is Non-Recourse Factoring Different from Regular Factoring?

Even today, not everyone is familiar with how factoring works. It’s becoming much more popular now since banks have become quite recalcitrant in approving small business loans, but still, there are business owners who don’t understand how they can benefit from factoring. Even those who are already aware of factoring may still not be fully aware of how non-recourse factoring is different.

Regular Factoring

This is how factoring commonly works: you use your accounts receivable to get the funding you need. The factoring company “buys” receivables from you and in exchange you get an advance on the value of the invoice instead of waiting for 30 days for your customers to pay you in full. The customers then send the payment to the factoring company directly, who in turn will send you the rest of the payment owed to you, minus their fees.

The percentage of the advance depends on the factoring company, and how creditworthy your customers are. On average, a top factoring company may offer up to 80% of the value of the invoice and charge you a measly 3% of the value. So if the invoice is worth $10,000 then you may get $8,000 right away to use as you will, and when the company pays after 30 days you then get $1,700 because the factoring company takes $300 as fee for its services.

When a Customer Doesn’t Pay

Regular factoring is also referred to as full recourse factoring, because the factor can get back the advance from you if your customer doesn’t or can’t pay the invoice. Usually when the customer pays late, you pay an extra fee. But if the customer doesn’t pay beyond the specified time period in your contract, then you have to give the money back.

Returning the advance may take form in several different ways. Maybe it’s as simple as returning the money. But since you may have already spent it, you may have to offer another invoice as payment and the money is taken from your advance. Some factoring companies even take a portion of the advance payments for the invoices to fund an account that’s specifically meant to cover such a contingency.

Even though the factor can get its advance money back from you, it’s still terribly inconvenient and troublesome when a customer doesn’t pay up. It’s for that reason factoring companies investigate your customers to see that they have a good credit standing.

So What Is Non-Recourse Factoring?

In non-recourse factoring, you don’t have to return the cash advance if the company doesn’t pay. In most cases, a “modified” non-recourse factoring agreement is in place. This usually means that you don’t have to return the advance if the customer suddenly becomes bankrupt. However, because the factoring company takes a bigger risk, the fees may be greater and the advance may be less.

Theoretically, your non-recourse factoring options may also include a full non-recourse agreement. Here, you won’t have to return the money if the customer doesn’t pay for any reason whatsoever. This type of factoring is so rare that it is almost non-existent, and the fees can be truly high if it is ever offered.

What all these means is that you have to really understand what your agreement with your factor entails. Whether you use non-recourse factoring or not, you have to know the exact terms of your agreement so you know what to expect in case a customer does not meet their financial obligations to you.

The Ins and Outs of Purchase Order Factoring

Some asset based lending companies have a wider definition of what kind of assets can be used as collateral. Most lending companies consider the small business owner’s home as a viable collateral, while others may also accept expensive equipment as security. Some even offer financing based on a company’s purchase orders and accounts receivable, and that’s where purchase order factoring comes in.

Using the Purchase Order

The entire process starts with a purchase order from a customer. Your business may not have enough working capital to fulfill the order which will force you to turn down the opportunity. But you don’t have to do that because some asset based lending companies can help.

What they can do is provide you with extra capital based on the value of the purchase order. You need to demonstrate that the purchase order offers a wide margin of profit, so that the lending company can take its share without hurting your business. You also have to prove that you have the means to fulfill the terms of the purchase order.

Usually, you’ll be provided with a line of credit so that you can pay your suppliers in order to fulfill the purchase order. Your progress towards completing the project will be monitored closely.


Once you have succeeded in fulfilling the order, the next step comes in. Usually, your customer is another business, and you allow it to pay you in full in 30 or even 60 days. Since you’re obviously in need of working capital immediately, that wait may not be good for your business. So again the lender steps in and helps.

They advance you the money based on the value of the payment coming to you. You get an advance that may be worth about 70 to 80 percent of the value of the contract. You can then use that money to cover essential expenses, or even to fulfill other purchase orders so you won’t need the help of the lending company again.

When your client pays in full within the agreed upon time period, you can then get the rest of the money. This is after the lending company gets the money they advanced to you.


The benefit of this entire process is twofold. First, you get the money to fulfill your purchase order. Without it, you don’t get to benefit from the business opportunity. You may also tarnish your reputation because you don’t have the capability to fulfill orders.

The other benefit is that you get your payment in advance. This allows you to take advantage of other business opportunities that will come your way. You don’t have to wait to get your own money anymore, and you can use it to make your operations more efficient.

With purchase order factoring, you get your profits, your lender gets their fees, and your customer gets their order. Everybody wins.

Minimize Your Need for Assets Based Lending by Tracking Your Business Expenses

Many small businesses find themselves in a financial bind every now and then, and they find themselves in need of assets based lending or account receivable factoring. They may get loans using their equipment as collateral, or they may get an advance on their accounts receivable to help take care of their expenses.

If you’re running your own business, you may find it helpful to use account receivable factoring. But it may also be a very good idea if you keep track of your expenses properly.

Here are some ways you can improve how you track your business expenses:

  • Hire an accountant. If there’s one thing that will really help you with your accounting, it’s a professional accountant. You can’t possibly match their knowledge regarding the various tax laws that apply to your business. You can try to do your own research, but that takes away your focus from running your business.
  • Always keep your receipts. Receipts serve as handy reminders of what you’ve spent for your business. And they’re also needed for tax purposes. So keep all of them, and make sure that they have the date and time of the transaction. Also write at the back of the receipt or an attached form the reason your business needed the expense.

To make sure you don’t lose your receipts, keep them in a secure place. It may also be very helpful if you get a digital image of your receipts in a computer file as well.

  • Keep business and personal expenses separate. That means you don’t use the same credit or debit card for buying business supplies and home furniture. That just makes it more difficult for you to track your expenses. By using a business credit card, then you have a handy way of tracking how much you’ve spent. In addition, you also don’t give the tax people any reason to think that you’re treating your personal purchases as business expenses.
  • Update your accounting weekly. Or perhaps you can do it daily. Just set a specific time during which you record your expenses in a computer file. You also take note of deposits you’ve made, client payments, and bank statements.
  • Use apps and software. There are several apps and programs you can use so that it’s easier for you to track your expenses. With these apps, you can track the mileage you’ve travelled, your billable time, and your various business expenditures. These apps are available for both iPhones and Android phones, which means you have them everywhere with you.

By tracking your expenses properly, you will discover which expenses aren’t necessary and eliminate them to reduce your total business expenditure.

Tips for Boosting Customer Relations Which Can Maximize the Benefits of Small Business Factoring

When you’re involved with small business factoring, your relationships with your customers invariably comes into play. When you factor receivables, you get an advance on the money owed to you by your customers. Your customers then pay your factor on the due date and then you get the rest of your money (minus the fee charged by the factor) when your customers pay in full.

The fee and the advance are all determined by the creditworthiness of your customers. You pay a fine when your customers pay late, and you have to pay back the advance when they don’t pay you back at all.

So it’s very important that you have a good working relationship with your customers. Here are some tips about customer relations so you can maximize the benefits you get from factoring.

  • When you have new customers, set credit limits for them. A new customer is usually an unknown entity, and so you have no idea of how (or if) they pay their bills. You need to set a credit limit, so you can monitor their payment habits without risking too much.

Your customer should know about the credit limit, and they should know what steps they need to take in order to get better credit terms. Perhaps when they’ve paid in full and on time for a given time period, you can increase their limit.

  • Always set clear conditions and terms in your contracts. You must have a proper written contract with your customers, whether they’re old or new. If you’ve been used to verbal agreements with your customers, that has to stop if you expect to factor receivables.

Everything should be specified, every word defined clearly, and every figure clarified. There should be nothing unclear about the contract, and nothing should be open to interpretation. That keeps the misunderstandings and confusion to a minimum. And if the terms and conditions change, a new contract must be drawn and signed by both parties.

The amount owed to you must be specified. And the due date must also be very clear as well.

  • Try to forge a secure personal relationship with your customers. Building a strong personal relationship with your customers doesn’t just get you more sales. It also ensures that the companies you sell to pay the amount they owe in the time specified in the contract.

A contract may not be enough to deter your customers from paying late. But if you have a personal connection with them, they may be less inclined to destroy or damage that trust.

Customer relationships are essential for your business. And it becomes even more important when you’re engaged in small business factoring. By having a strong relationship with your customers, you can also make sure that your relationship with your factor is smooth as well.

How Independent Truckers Benefit from Trucking Factoring Companies

Independent truckers need a lot of funds to operate efficiently. It’s for that reason they may turn to factoring companies for their working capital, because getting a bank loan is usually an exercise in futility for them. The process takes too long and the chances of getting a loan aren’t good to begin with. And to really maximize the benefits, choose the best factoring companies which in this case are factoring companies that actually specialize in trucking.

How does it help you as a trucker if you only choose among AR factoring companies that specifically cater to your industry? Here are some advantages:

  • The application process is simpler and faster. You don’t have to explain to the factoring companies the specific nature of your industry. They already know all about it. And that means they also know how to investigate your customers quickly so that they can determine if they have the capacity to pay you what they owe and on time.

It’s actually a relief when you deal with these types of factors, because you can avoid a lot of troublesome miscommunication. They’re familiar with your needs, and setting up a factoring line is much quicker because they’ve already done it before numerous times. If you really want efficiency in getting your capital quickly, then you need a specialist factor.

  • Higher invoice value. Since these factors are already set up for trucking companies, they can arrange for you to get more money and at a faster rate. For example, while many standard factors offer 70% of the value of the accounts receivable in advance, with factors that cater to truckers you may get more money in advance. You may even receive up to 90% of the value in advance.
  • They provide real-time reports. With a smartphone, you can check what’s happening with your accounts right away while you’re on the road. You can see how much advance cash you’re likely to get, and you can check which of your customers are due for payment. The state of your finances becomes much clearer and you can access these accurate reports right away.
  • You’ll receive credit reports on your customers. When you apply for factoring, the factor isn’t really concerned with your ability to pay them pack. You’re getting money based on what you’re customers owe you, and so your factor checks on the creditworthiness of your customers.

You don’t have to hope that your customers will pay on time (or pay you at all), nor do you have to check their credit yourself. The factor can do this for you, and they will even give you their credit information so you are better informed.

  • You get other freebies. These factors are very much aware of what you need, and some of them may offer perks to win your business. For example, they may offer a fuel card if you do business with them.

So if you’re an independent trucker or you own a fleet of trucks, make sure that the factoring companies you consider are those that already cater to businesses like yours. A regular factoring company can help you, but specialist factors are way better.