Why do business owners often seek relief from the challenges of running a business by factoring their Accounts Receivable? Most reasons are fairly simple and recognizable, such as poor cash flow, sudden growth, to take advantage of some business opportunities requiring cash, or in some cases just to get caught up, maybe due to seasonal swings. All these reasons resolve some sort of financial concern and sometimes necessary in order to operate their business.
There is another reason, one that is more common than one might think. It has to do with quality of life, such as sleeping at night and not having to panic at the end of every week or month because either payroll has to be paid or suppliers and vendors are screaming for money. You typically have an idea when shipment of goods or delivery of services will take place, therefor enabling you to invoice for same. However, you really don’t know when the check will come in for those invoices. That not only creates a guessing game but puts a strain on paying your bills timely and can interfere with you and others in your organization to do the productive side of your job. It doesn’t eliminate calling customers to remind them an invoice is due, from time to time, because that is just good business. However, it does eliminate the do or die and threatening calls because you are desperate to meet payroll. It also minimizes the times that you or somebody in your office has to physically drive and pick up a check because you are afraid of the mail taking too long or of the fact the check might not actually get mailed. It eliminates that certain time of day, when the mail comes, as being the highlight of the day, good or bad. So when you are out of the office, whether it’s a business meeting or on the golf course, you don’t have to excuse yourself because you have to check in at the office to see if a certain check came in, and if it didn’t, “ what do I do now.”
Not only can it make business easier, it also might make it more profitable because you aren’t wasting time worrying and collecting.