Small Business Factoring Invoice 4 Tips

4 Tips on Getting Paid with the Right Invoice

When you engage in small business factoring invoice, the factoring company gives you an advance on what your customers are supposed to pay you. The typical top factoring company will usually advance you about 70-80% of the value of the invoice. When the customer pays in full, the rest of the money is sent to you after the factoring company takes out its fee.

If your customer pays late, then usually there’s an additional fee involved. And if your customers don’t pay at all, then you’re obligated to return the money that was advanced to you.

So it in your best interest to make sure that your customers pay. And did you know that you can increase your chances of getting paid just by improving your invoicing? Here are some tips that have resulted from studies involving hundreds of thousands of invoices:

  1. Put your logo on the invoice. Why shouldn’t you put your logo there? After all, it boosts your branding, and it’s another chance to increase the visibility of your logo and your brand.

But according to the study, an invoice that contains the company logo is actually 3 times more likely to be than an invoice that doesn’t have a logo.

There are several possible reasons for this. Perhaps your customer overlooks the invoice because it doesn’t look official enough, or perhaps the lack of a logo simply makes it look unimportant. But whatever the reason, it makes perfect sense to add your logo to all your invoices.

  1. Put the due date on the invoice. This is perhaps too obvious a tip, but you’d be surprised at just how many invoices lack this crucial piece of information. It was found in the study that up to 24% of invoices were sent out without an explicit due date at all!

It seems a logical conclusion that invoices without a due date are much less likely to be paid, and the study proves that conclusively. It was discovered that when the invoice contains an explicit due date, it is 8 times more likely to be paid on time. So put that date on the invoice, and make it prominent. Don’t just put the date on which the invoice was issued and then say that it is due on 30 or 60 days. The deadline has to be explicitly stated.

  1. Include the terms in the invoice. That means if you expect to be paid in 30 days, state it clearly on the invoice (along with the due date). It was discovered that when the terms are stated, the invoice is 50% more likely to be paid than if the terms were not there.
  2. Include only one name on the invoice. Address it to 4 people, and the invoice is 50% less likely to be paid. After all, people can see the invoice and figure that other people are responsible for paying it.
  3. Be polite. Use phrases like “please” and “thank you”. Invoices with these phrases are 5% more likely to be paid.

All these improvements on your invoice require very little effort on your part. But they can sure increase your chances that your small business factoring invoice gets paid!

How a Top Factoring Company Can Help You Run Your Medical Clinic

Running your own medical or dental clinic is a huge undertaking, and usually you can’t go at it all by yourself. Not only will you need employees, but eventually you’ll need more funding especially if you plan to grow your practice. For many healthcare professionals, a top factoring company may be of better use than a bank in securing the funding they need.

  • Banks take too long. Banks nowadays are very cautious about lending money to a small business. Even if you do qualify for a business loan (and that’s a big “if”), the entire application process takes an interminable length of time. The bank will ask a lot of questions. The bank will take a very careful look at the state of your finances, how you plan on using the money, and how you plan to repay the loan.

In contrast, a factoring company takes a shorter time to decide on medical business factoring loans. And they’re also much more likely to provide the funding you need.

  • You can use the advance money for growth. In factoring, you get most of the money upfront from the factoring company, instead of waiting a long time for the payment from your customer. And you can do a lot with that money. You can make sure your people get paid on time, and that you have the working capital to cover various expenses necessary to run a medical clinic from day to day.

You can also use the money to get more advanced equipment. For example, if you’re running a dental clinic you may wish to offer advanced computer imaging technology so that you can offer state of the art aligners such as Invisalign. You can also expedite the production of crowns so that it only takes a single visit to the clinic. You may even offer dental implants to replace missing teeth, instead of just ordinary dentures.

Your clinic may also benefit from additional advertising as well, and you can use the money to improve your clinic’s website.

  • You get extra services. It’s not just the funding through which a factoring company can help. Essentially, they can handle your invoices for you, and you can check up on them easily online. The factoring company can organize your invoices to see which payments are due and how much you’re going to get in the future.

The factoring company also deals with the third-party insurance companies, along with Medicare and Medicaid. Dealing with these institutions is one of the most frustrating aspects of running a clinic, and now you’re spared from the trouble. You can now concentrate on providing the best care you can for your patients, which is probably why you became a doctor in the first place!

As a doctor, you’re sworn to help people get better, and that’s what you’re trying to do with your medical clinic. But let a top factoring company help you, so that you can provide even better service to your patients.

Looking for a Staffing Company Loan? (Tips )

When you run your own staffing company, it’s not always easy to monitor everything that’s going on. Things can slip down the cracks, and you may end up s in need of a staffing company loan. It may help your staffing company cash flow if you try to automate the billing process, however.

But how do you do that? Here are some suggestions offered by experienced business owners:

Hire an Accountant

Or you can outsource the entire billing process to an accounting firm. You have to admit, if you’re running your own business that doesn’t mean you’re going to be a great accountant. As the owner and manager of a staffing company, you may have been a people person who’s always delighted in seeing people find employment, and not exactly a dedicated number-cruncher.

By hiring an accountant, you spare yourself many hours of work on your billing and accounting. These things can be a distraction, when you have more important things to do which are much more suited to your skills. You can then concentrate on finding new clients for your workers, providing their training, and making sure they have all the supplies they need to do their work properly.

Synchronize Your Billing System with your Accounting System

If you insist on doing the accounting yourself, or if there’s no budget for an accountant, the least you can do is to make sure your invoicing and billing system is set up properly with your accounting platform. All the data must fit and complement one another, and all your accounts must reflect the current state of affairs.

By synchronizing your invoicing and billing with your accounting system, you save precious hours of work. What’s more, you get a more accurate idea of your company’s financial state, and you minimize the chances of error.

Be Updated with the Latest Technology

Regardless of what billing and accounting software you use now, every now and then you should go online and check out new tools available. When it comes to accounting software, things are always changing and improving. Even though you may have to learn an entirely new process, the new technology may represent a much better way of doing things for your accounting. You can’t just keep on using the same old programs.

Make It Easy for Customers to Pay

If possible, get a platform that allows your customer to pay automatically through online or mobile means. When you can accommodate a variety of payment methods, you give your clients fewer reasons not to pay on time. Making things easy for your customers benefit you as well.

Don’t Forget to Add a Personal Touch

Instead of sending cold collection mails and payment reminders, you may want to use a more friendly personal emails instead. It’s been demonstrated that often a personal email is much more effective in encouraging customers to stay on track than a coldly professional automated message.

It’s not unusual for your business to need a staffing company loan every now and then. But by automating your billing properly, you may not need a loan as often as you think.

How to Smartly Use Staffing Company Cash from Factoring

When you start your own staffing company, your startup capital is spent first on office rent and supplies, recruitment and advertising so you can get customers. But when your company begins to attract a fair amount of clients, you’ll need to grow and for that you need more staffing company cash.

While you may try to get a loan from staffing direct lenders, you may also want to try factoring instead. Your clients often pay you for your workers’ services in 30 or even 60 days, but with factoring you can get that payment (or at least 70-80% of its value) from the factor in advance.

So how should you use your available working capital? Here are some ideas:

  • Improve your website. A website for your staffing agency is one of the most convenient tools at your disposal. It serves as an advertisement for your customers so that they know what kind of personnel you’re offering and at what rates. Here you can list down all the services you can perform for your clients.

It also serves as a recruitment tool for potential workers as well. You may not even need to have your potential applicants come in to your office. Instead, they can take a few tests online to see if they have the skills you’re looking for. If they pass, your website has your address and contact information so that they can come in to your office.

  • Hire new workers. If your staffing agency is attracting more clients, you may need more workers to meet the demand. That means lots of additional expenses. Not only do you have to meet your increased payroll, but you will also need to get insurance for all your new workers. And then you also need new supplies, such as time cards, orientation material, or workplace supplies such as uniforms.

Recruitment may not always be easy, and to attract more applicants you may have to advertise for workers more extensively. You may also need to grant bonuses for referrals.

  • More training for workers. Even if you carefully screen your workers for their skills, you may need to provide more training for them. New workers will have to be taught about how you want things done, because their performance will reflect the professionalism and productivity of your staffing company. You’ll want to make sure that they are courteous as well as knowledgeable about their tasks.

You may also want to provide additional training for current workers. For example, if you’re running a janitorial service you may want to teach some of your workers how to clean carpets properly.

If you’re running a car repair service, you may want to make sure that your workers are all familiar with all the new technology that cars have every year. At the same time, you may want to teach younger mechanics about how classic cars and antiques should be handled.

As the owner of a staffing agency, you’ll find that you’ll always need more staffing company cash. Luckily for you, you can get needed capital from factoring companies if banks won’t grant you a loan.

The Drawbacks of Non-Recourse Factoring

In regular factoring, you receive an average of 80% of the value of the invoices you submit in advance. You get the rest when the customer pays in full, and only after the factoring company takes its percentage off the top. The factoring company has the recourse to get its advance back from you if your customer doesn’t pay within a specified time period, which is usually 90 days. But in non-recourse factoring, the factoring company doesn’t have that option.

This looks like a better deal for you, because you won’t have to return the advance if your customer suddenly declares bankruptcy. But looks can be deceiving, and your non-recourse options may not look so attractive when you realize the consequences.

Limited Invoices for Factoring

The first disadvantage is that some of the invoices that may have been factored would now be rejected. In factoring, the factoring company always investigates the creditworthiness of your customers. If they think that the customer is too risky to extend credit to, then they may refuse to provide an advance or demand higher fees with lower advances.

But with non-recourse, the definition of “risky” becomes broader. Some invoices that would have been factored in the regular recourse factoring method will now be rejected if they pose any kind of risk that they may become bankrupt.

Lower Advances and Higher Fees

Even if a customer is now approved for factoring, the advance you get from the value of the invoice will be lower. In regular factoring you get an 80% advance on average. Now 80% probably represents the highest possible advance you can get. In general you’ll get a lower amount than that, and some small business factoring companies may even just offer 40% of the invoice value.

And yet, while the factoring companies try to minimize their financial risk, the fees they ask for will increase because of the inherently higher risks with non-recourse factoring. The average 3% in fees that factoring companies ask in regular factoring may jump to as high as 6% per 30 days. That’s in addition to other standard fees that your factoring company may charge you with that are part of the non-recourse option.

Affected Customer Relations

When you’re engaged in non-recourse factoring and you have a new customer, your factoring company plays a greater role in how you deal with that customer if you want the resulting invoice factored. The factoring company can determine which customers should be offered credit, and they may even insist on a credit limit for certain customers.

The factoring company may also have a different approach to collections as well. In regular factoring, they can remain friendly when sending reminders, because they know that if the customer doesn’t pay up then you have to send back the advance you got. But now the factoring company may become firmer in insisting that your customer pays on time so they can be sure of getting their advance back from the customer.

All in all, there may be some instances when non-recourse factoring may work very well for you. But in general, you may want to stick to regular factoring so that you can maximize your funding and limit the fees you pay.

Common Fallacies about Toronto Accounts Receivables Factoring

Trade receivables financing specifically invoice factoring is becoming very common all over the world. However, in Toronto accounts receivables factoring is still subject to a lot of misconceptions. So to set matters straight, here are some of the more common fallacies:

  1. Factoring is only for large companies. Admittedly, this fallacy was actually a fact more than 2o years ago. But today, factoring is used by small and medium sized businesses as well. This is especially true since the recent recession, when banks became much more cautious about lending money to small businesses. The factoring industry opened its arms to SMBs and this relationship has become stronger since.

By 2013, factoring worldwide was a $3 trillion business, and that’s not all with large corporations, obviously. According to Forbes, alternative means of capitalization for small businesses such as factoring would be a major trend for 2015.

  1. Factoring is very expensive. Again, this depends on how you look at it. At first glance, it is true that the cost of factoring may be greater than what a bank would charge in interest for a business loan. But according to one report, big banks approved only 21% of small business loan applications in January 2015. That’s a rejection rate of 79%! For small banks it’s a bit lenient, but the approval rate is still less than 50%.

So you don’t compare the cost of factoring to the cost of a bank loan, which is something you’re unlikely to get anyway. What you should compare it to is the cost of not getting the money from factoring. How much would it cost you if you can’t get the funding needed to cover the payroll, buy supplies, or get a move on in your advertising? If the advance money you get from factoring increases your sales to up to 50% then isn’t that money well spent?

  1. Factoring is a last-ditch effort to save a failing company. Now this is absolutely not true at all. While some companies do use the money for such dire emergencies as meeting payroll, the truth of the matter is that factoring companies mostly do business only with companies with a future. The factors think that the company can overcome these temporary setbacks.

The real truth of the matter is that most businesses use factoring for growth, and not just for survival. The proof is that they have creditworthy customers who pay fully and on time, which is what the factors look for when they offer the advance on accounts receivable. They give you the money in advance so that you don’t have to wait 30 or 60 days, and they get back the money when the customers finally pay up.

  1. The collection methods of factoring companies may alienate customers. Again, there is no truth to this nonsense. Factoring companies simply notify your customers of where they should send their payments, and they also send them very polite notices about overdue bills. When there’s a real problem about a non-paying customer, then you’re called in and you’re asked to deal with your customer yourself.

In Toronto accounts receivables factoring is also poised to make a big splash among the small business market. When the truth about factoring spreads, there’s no doubt that small businesses will take advantage of this opportunity for capitalization.

How a Staffing Factor Helps a Security Agency

A staffing factor is company that specializes in providing staffing agency funding. They offer an advance based on their customer’s accounts receivable, so that staffing agencies can cover urgent expenses such as payroll. Here’s one possible scenario in which factoring really helped a staffing agency grow.

XYZ Security Company

XYZ Security Company offers security guards for malls and for gated communities. The company often has cash flow problems, because their customers tend to pay only after 60 days. That means they have to cover payroll for 8 weeks before they get paid.

The company considered getting a bank loan, but they were rejected because they don’t have enough assets to use as collateral. So the company always strives to keep some money in the bank so that they can cover the costs of new clients.

Growth Opportunity

XYZ Company’s reputation has grown over the last decade, and now they have been approached for a lucrative contract. A property company has asked that XYZ provide security guards for their 25 gated communities. However, the property company only pays invoices in 75 days. That means the XYZ Company has to cover the payroll for 11 weeks before they get their first payment.

Each community has two gates, which means they need 50 guards at any given time. Since the guards have to be there constantly, XYZ had to provide three shifts of 8 hours each per day, and that means every day will require 150 guards total. Each security guard earns $600 a week on average, so every week the XYZ Company spends $90,000 on payroll. But the contract says that each week the security company gets paid $117,000, which represents a 30% profit margin.

The Factoring Solution

XYZ Company only has $100,000 in its bank account, but they need $90,000 for 11 weeks before they get any money from the property company. So without a loan, they couldn’t accept the contract.

But here’s where factoring helped. A typical factoring company charges 1% for every 10-day cash advance, and provides 80% of the value of the invoice as an advance. That means XYZ gets an advance of $93,600 for each week, which is more than enough to cover the weekly payroll for the guards.

After 75 days, the factor is paid in full by the property company for the first week of the security job. The factoring company then subtracts 7.5% of the value of the invoice. That’s $8,775 and so the factor sends back $14,625 to XYZ.

Thus, XYZ still earns a profit of $18,225 a week on the contract! That’s a yearly profit of $947,700. Can you imagine that XYZ almost said “no” to almost a million dollars a year?

That’s how factoring companies can really help staffing agencies. Unlike other types of businesses, staffing agencies must meet its considerable payroll responsibilities. Now thanks to a staffing factor, XYZ Company was able to meet payroll and still earn substantial profits. The 7.5% in fees was truly worth it!

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!

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.

Why You Need to Pay Your Employees on Time

There are many uses for accounts receivable factoring. The most crucial of them all is probably meeting payroll. Of all the expenses that any small business owner needs to take care of, it is payroll. Your employees are the lifeblood of your company, and not being able to pay them on time is a nightmare waiting to happen.

What Happens When You Don’t Meet Payroll?

The first thing that happens is that everyone in the company now knows that your business is failing. It’s not just a temporary setback. Your business is seen as a ship that’s sinking… rapidly. And that means many of your employees will jump ship and seek new employment elsewhere.

This is a death knell for your business, because even if you resume paying them the next time with back pay, they now know that you let it happen. And that means there a very good chance that it will happen again because there’s already a precedent.

Then there are legal consequences. Every unpaid employee can file a state wage claim against you. The Department of Labor may impose penalties against you for violating labor laws regarding fair payment of employees. You may also be falling behind on your quarterly payroll taxes, and now you have the IRS on your tail with their own fines and penalties.

Or you can close up shop and declare bankruptcy.

How Do You Avert This Disaster?

The first thing is to check if you have the money in your accounts receivable. If you do and you predict that you won’t be able to meet payroll in a month, then you can still be saved from a potential disaster. That’s because you can still use accounts receivable factoring.

In factoring, you get your money from your invoices (around 80% of the value), except you won’t have to wait for the 30 or 60 days that your customer has to pay in full. You can contact a factor and apply for factoring, and then the factoring line can then be set up. That should take only a week or two, and then you can get your money from your accounts receivables. And other incoming accounts receivable can be turned to cash in a day or two.

Other Methods of Meeting Payroll

There are other things you can do to make sure your employees are paid on time. Go on Facebook and borrow from your friends and family. Use your credit card. Sell things you don’t need. Don’t even think about paying yourself a salary. You can even sell surplus company equipment.

As you can see, you need to do everything in your power to pay your employees. And once you do, you may have to consider cutting down on manpower.

What you don’t do for payroll is to go to a bank get a loan. Even if by some miracle you meet their business loan qualifications, it will simply take too long for you to get the financing you need and by that time it will already be too late.