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Why Factoring Should Be A Permanent Business Practice

Posted on May 28, 2014 in Factoring

When an entrepreneur gets a business idea, he puts that idea down into a business plan. In that business plan he outlines what his business will do and the resources he will need to make that business a reality. The business plan includes the functions of all of the essential departments that will be part of the start-up and an estimate on how much staff he will need to get off the ground. A good business plan also includes projections on how much the company will grow per year and how much revenue the company will generate, but those projections rarely include the methods that the company will use to facilitate growth.

A company evolves and changes over time. The business plan is revised regularly to indicate changes in the industry, and alterations to the global business climate and the evolution process that the business is experiencing. The business methods that worked when the company first started may not be robust enough to stay in place as the customer base expands and the demands on the company become more intense. The business practices that were originally envisioned may also not take into account the realities of the corporate world. For example, new entrepreneurs usually expect to fund their ongoing operations with company cash flow. But when they actually open for business, they realize that past due invoices are just as real as corporate revenue.

 

1st Commercial Credit Offers A Business Process That Is Easy To Implement


As a business evolves, the owner is always looking for better ways to do things that will not cost him more money. When it comes to outstanding invoices, it can seem like a hopeless battle between a company’s collections staff and the clients who always have intriguing reasons why payments are not made on time. You could continue to hire more collections people and even open up the budget to hire accounts receivables professionals that are the tops in their field. But is that really how you want to spend your company’s money? Is that really the best business process to use when it comes to getting the maximum cash flow from outstanding invoices?

Instead of adding to your company’s debt by hiring more people, you need to bring in an experienced factor such as 1st Commercial Credit to make the cash flow process easier. Factoring is something that has been around for a long time and 1st Commercial Credit has used its factoring expertise to help small to medium sized companies all over the world to meet their financial goals. When you put a new financial method in place, you want to be able to rely on the results and plan your company’s future around it. With factoring from 1st Commercial Credit, you will be able to generate a sustainable flow of cash that can be used to meet all of the expectations you have for your organisation.

 

Invoice Discounting Will Improve Your Profitability


Not only is factoring easy to implement and will not force you to hire more employees or pay more in business expenses, but it will also help your company to be more profitable over time. The most direct way to higher profitability is to generate more revenue. It sounds simple, but generating more revenue requires your company to be able to hire employees and pay for more materials to fill the increase in customer orders. If you are generating more invoices but your cash flow is still slowed by past due invoices, then taking on more business can actually start to cost you money. You will have to find ways to fill the increase in orders and that will lead you to more bank borrowing.

The profitability of your company is also affected by the type of debt that you take on in the course of doing business. Bank loans and credit accounts all have high monthly service charges and interest debt that accumulates regularly. Not only are the balances on your loans and credit accounts considered new debt for your bottom line, but the service fees and the compounding interest makes the debt even worse. The longer you spend paying down bank debt, the higher the overall cost of that debt becomes. To give it some perspective, think about a 15-year mortgage at five percent for a home that costs 100,000 pounds. Over the life of that loan, with just interest, your 100,000 pounds has ballooned to approximately 150,000 pounds. You have added 50 percent to your debt with a reasonable interest rate. That is the damaging effect that bank lending can have on your company’s profitability. Factoring allows you to avoid that effect.

 

Put Invoice Financing In Place And Let It Be Part Of Your Process


To this point, we have discussed the importance of using factoring to enhance cash flow and avoid taking on more bank borrowing debt. Now let us take a look at how your business process will benefit from making 1st Commercial Credit’s factoring services a permanent part of what you do. First of all, a factoring programme will insure that you always have cash on hand to meet your debt needs. That kind of financial security allows you to always meet payroll and it also gives you a stronger position when it does come time to utilise bank funding for much larger projects. Investors and lenders always like to see a healthy cash flow before they loan out money.

With an invoice financing plan in place from 1st Commercial Credit, you will no longer have to wonder when you will get paid for each invoice you generate. Your collections process will be dramatically different and it will actually work in your favour. Instead of wondering which one of your new invoices will become past due, all you need to do is submit your invoice to 1st Commercial Credit for the approval process and you will have an answer 24 hours later. You will be able to schedule your vendor payments and keep your sales ledgers clear because you will always know when you will get paid for each invoice your company creates.

 

Streamline Your Financial Process With Invoice Factoring


A good business owner knows that an efficient business is a financially-sound business. When you are able to streamline your processes to the point where they are as efficient as they can be, then you can avoid losing money on your business process. It becomes even more beneficial when you can find an inexpensive and efficient process that actually generates more revenue for your company. By providing you with a reliable cash flow that allows your company to grow and reduces your need for bank borrowing, factoring from 1st Commercial Credit becomes that streamlined process that generates income as well.

Contact 1st Commercial Credit today and we will explain to you how we can make our process part of your business. We will show you a custom factoring plan that will develop a reliable business line of credit that you can rely on each and every time you have obligations to pay. We will take all of the guesswork out of your receivables functions and replace that guesswork with the kind of confidence that allows your company to grow and be as successful as you want it to be.