Late paying clients are not only difficult, but also can negatively impact your business’s cash flow. That’s why more and more small businesses are turning to invoice factoring, the purchase of an invoice at a discounted rate in exchange for fast cash, as a financing option.
However, the system can be difficult to navigate. Watch out for these common mistakes:
1. Misreading (or ignoring) the fine print
Invoice factoring, just like any financial agreement, it’s important to read the fine print. Some factors will charge fees beyond the factor rate.
2. Failing to redirect payments
Make sure that you’re not receiving payments that should be going to the factor. Otherwise, you’ll lose the trust of your factoring company — and may even end up owing extra fees.
3. Submitting purchase orders
Remember, purchase order financing and invoice factoring are not the same. Purchase order financing provides the necessary working capital for your business when you have sales orders but need the money to fulfill the transaction. Invoice factoring, on the other hand, is more like a loan designed to bridge the gap between product or service delivery and payment of invoices.
We at RMP Capital pride ourselves on providing creative funding services that allow you to effectively run and grow your business while we handle speeding up your cash flow. To learn more, call us at 631.738.0047. For more tips, find us on Facebook, Twitter, YouTube and LinkedIn.