In just about every industry, businesses including maintenance companies always aim for growth in order to increase profitability. However, growth opportunities often require a rather large amount of ready cash, and that’s where maintenance factoring comes in.
Case in point: one maintenance company was awarded a contract to provide maintenance services for Wal-Mart. This was truly a big boost for their business, but not without some hitches. With maintenance factoring, these problems were all ironed out and the company’s operations proceeded smoothly.
The Scope of the Maintenance Services
The contract called on the maintenance company to provide a wide variety of services.
- They were required to sweep the parking lot every day.
- They had to provide porter service.
- They were tasked to check on the paint on the walls, and to touch up the paint when they begin to peel or crack.
- They were required to provide janitorial services inside the establishment, which included vacuuming, dusting, and cleaning the windows.
- They were also asked to provide pressure cleaning services.
All these services required a lot of money to materialize. The company needed to pay for all the people they had working, plus they had to make sure that they had the tools in working order and they had ample cleaning supplies.
But of course, their problem was that they didn’t have enough money, because it was tied up in various accounts receivable. Other clients were paying 30 days or even 90 days after getting the services but with the cash advance the company got for these accounts receivable, they didn’t have to wait at all.
Late Payments by Major Retailers
While the scope of the contract with Wal-Mart meant big bucks, the payment arrangement is a bit tough. Wal-Mart, after all, does have a reputation for tight-fistedness. Major retailers usually take a much longer time to pay, and the maintenance company had to wait a few months to get the payment. But since Wal-Mart wasn’t their only client, that meant they would have had trouble coming up with the working capital to fulfill other jobs.
But with factoring, this problem was solved. Factors which specialize in the maintenance industry can expect such lateness and deals with it accordingly. They’re not like other factors who couldn’t take invoices that specify payments that late. Since Wal-Mart is a secure company, they know that the money would come, eventually.
So using the invoice from the Wal-Mart contract, the maintenance company could then serve their other clients with no difficulty.
Acquiring New Clients
Growth means getting new customers and new jobs, and the Wal-Mart deal can help with that. It’s all a matter of bragging rights. The company can always trumpet the fact that Wal-Mart deemed their services worthy of servicing the Wal-Mart establishment, and so other businesses which need maintenance services can be assured that the company is good enough.
Without maintenance factoring, accepting the Wal-Mart contract would not have been feasible, and growth would not have happened. The same advantages that this maintenance company received from factoring can also apply to your business.