Are you stuck with great but slow paying clients? It is interesting how your biggest asset (great clients) can also be your biggest liability. But that is how business is. And as an owner you must adapt.

Whether you like it or not, slow paying customers are here to stay. As a rule of thumb, commercial clients pay their bills in 30 to 60 days. And lately, the trend has been deteriorating. So, what do you do if you have slow paying receivables.

Many owners try to go to the bank to get a business loan. Not surprisingly, few business owners get business loans. As a rule, banks will only finance companies that have long and established histories. This is not your case if your company is new or emerging from tough times.

If your biggest challenge is that you cannot afford to wait up to 60 days to get paid by your customers, then the solution is accounts receivable factoring. Most commonly known as factoring, this type of financing eliminates the usual wait to get paid. It provides you with the necessary funds to pay suppliers, meet payroll and take on new business opportunities.

And how does factoring work? Simple:

1. You finish the work and send an invoice to your client. You also send a copy to the accounts receivable factoring company.

2. The financing company advances you 70% to 90% of the invoice (a small reserve is held to handle disputes, etc.)

3. You get the funds in 24 hours

4. As soon the customer pays the invoice to the financing company, they rebate the reserve (less a small fee)

As you can see, accounts receivable factoring can easily be integrated into your business, providing you with prompt invoice payments. Usually, funds are advanced within 24 hours of submitting invoices.

Accounts receivable factoring is easy to qualify for. Accounts can be set up in as little as 4 business days. As opposed to business loans, the main requirement for factoring is to do business with strong credit worthy customers. So if you do business with good commercial clients (or the government), be sure to add factoring to your business tool chest.

About Commercial Capital LLC

We can provide you with factoring, invoice factoring and accounts receivable factoring. For a no obligation quote, call Marco Terry at (866) 730 1922.

Copyright © 2009 Small Business Resource

Can Accounts Receivable Factoring Help Your Business

1) Know your cost base.

What costs are fixed (ie, costs that you HAVE to pay) and what are variable (ie, that are essentially optional or that fluctuate with sales). Splitting costs in this way will help you to pay what needs paying and cut back on what doesnt.

2) Good credit control

Dont let your clients use you as a bank, if they want a loan for goods or services – thats where they need to go! You should be paid to the terms on your invoice, or earlier. Start a policy of telephone chasing outstanding invoices when they are X days overdue, then follow it up with a letter. Make sure your invoice terms are clear on your invoices.

4) Asset finance

Think about whether you really need to pay upfront for an asset or piece of equipment, could you lease the equipment? perhaps over the short term until you are sure its required or that your business finances can support a longer term commitment.

Or I like this one:

“I have a sign (just typed and laminated!) above my PC screen – it tells me “This business is not participating in any recession”

The rest are here: Small Business Survival Tips

If you have any tips you’d like to suggest …. by all means please do so by adding them as a comment.

Copyright © 2009 Small Business Resource

Top Tips For Small Businesses To Survive The Recession

Copyright © 2009 Small Business Resource

Ideal Finance for Your Business

Cutting costs doesn’t mean that your product or service offering has to be affected or suffer as a result. It is possible to reduce the operating costs of your business without impacting the quality of products and services that customers receive.

Raw Materials
First and foremost, if your business requires raw materials to function then compare the prices of different suppliers to ensure you are getting the best deal.

For a printer this could involve liaising with paper merchants or ink suppliers whereas a cafe owner may want to check with their food providers. Whatever the material, the principle remains the same.

You may find that buying in bulk helps to reduce costs or committing to a long term contract with one supplier can lead to discounted prices. If you pay shipping or postage costs, see if there is any room for negotiation on these.

Office Space
If you’re rattling around in an office space that’s too large for your requirements then downsize. Looking for cheaper office space in another area is also an option. Depending on the nature of your business, you could consider having staff work from home so you can cut the cost of renting business premises altogether as well as saving employee’s money and time spent on travel

If you do need to operate from a physical office location, look at the possibility of sharing space with another business to drive costs down.

Virtual offices are also becoming more and more popular and offer a cost effective way to have a physical office address without actually renting the space.

Settle Invoices Early
This may seem like a small point but some suppliers offer an incentive to settle invoices early, often up to 2%. Investigate this with your suppliers and if they don’t already offer an early payment discount, enquire about whether they would be willing to consider it.

Review Staff Costs
Cutting employee salaries is likely to have a negative effect on your business but there are some other staff costs that can be assessed. If your employees use business mobile phones then review the cost of the contract. Placing all of the handsets under a single business tariff can often help you save money for your business.

If staff need to commute for business meetings and events, encourage use of the most cost-effective means of travel. If accommodation needs to be booked then have a look around for the most competitive deals. Simple tactics like this can help to drive business costs down significantly and the larger your workforce, the larger the saving.

Reduce Energy Use
Cut your business electricity costs by encouraging employees to switch off their computers every night and ensuring office lights and equipment are all powered down before everyone goes home.

Jennifer is a part of the digital blogging team at cashzilla.co.uk who work with a growing number of finance brands. For more information about me, or to keep up to date with the latest in finance news, check out my posts at cashzilla.co.uk or visit my Twitter account, @cashzilla.

Copyright © 2009 Small Business Resource

Cut Business Costs: Some Helpful Tips

Small businesses often find it hard to improve their cash flow, with some business owners even tempted to use their own savings to raise finance. Banks are often wary of lending money to small businesses or start-ups, preferring larger companies with a proven track record. In reality, many small businesses would be more profitable if they could improve their cash flow, or afford to expand at critical times. Invoice factoring, also known as invoice financing, is the perfect solution if an ordinary bank loan is not suitable.

What is factoring?

Factoring is the process whereby cash is raised against your invoices. If you raise an invoice, instead of waiting 30 or even 60 days for your customer to pay, you can receive up to 90% of its value from a factoring company in as little as 24 hours. This is a form of loan, but instead of you paying it back, the factoring company receives payment of the invoice from your customer.

The fee that you pay for this service is a certain percentage of the invoice value. Again you don’t actually pay this fee; it is deducted from the invoice before payment is passed over to you. Factoring companies generally don’t like to deal with businesses that have lots of very small invoices. As you can imagine, the fee would either be too small to be worth their while or so large a percentage of the invoice value that you wouldn’t receive much cash!
Factors prefer to deal with companies that are seen as “low risk”. This means having a customer base who tend to pay their invoices on time and in full. It also means spreading your business amongst several customers, and not relying on just one or two accounts. The lower risk your business, the more attractive you are to any potential lenders.

Advantages of factoring

Not only is factoring a great way to improve your cash flow in a very short time period, working with a factoring company brings other benefits too. For example, the factor usually takes over management of your sales ledger and payment collection. This means that you don’t have to, so you have more time for other things – perfect for small business owners. Factors are also business experts and can provide lots of help and advice. It’s in their interests for your business to succeed, so partnering with a factoring company can put a wealth of knowledge on the end of the phone.

This is a guest post by Kedisha from Touch Financial, the invoice factoring specialist.

Copyright © 2009 Small Business Resource

How factoring can raise cash for your business

For any business providing products or services to other businesses on credit e.g. not cash sales, factoring can be a powerful tool for improving cash flow.??Through the factoring of its sales ledger a business is in essence selling its invoices to a third party, the factor. In return for which the factor will make available a pre agreed percentage of the total value of the invoice, before it is due for payment by the customer, with the balance to follow once the customer has paid in full.

A factor will usually handle day to day maintenance of the business’ sales ledger, in effect providing an outsourced sales ledger administrative function. Factoring is akin to a floating overdraft the limit of which is based on the amount of business a business is doing, in addition to outsourced sales ledger processing.??The percentage of each invoice to be advanced varies on the factor, the business in question and the agreement they have, but will usually be up to 85% of the value of the invoice.

Each invoice is raised, will contain payment instructions giving the factor’s details, and a copy of the invoice will also be provided to the factor themselves. The agreed percentage of the invoice will then be provided by the factor, usually within 24 hours of issue, and approval of the invoice.

The factor will then manage collection of the payment from the customer, operating credit control procedures, issuing statements, and dependant on the type of agreement, dealing with any bad debtors.

Once an invoice is paid in full by the debtor, the factor will forward the balance of the invoice to the business, with an agreed fee being paid to the factor. In addition most factors will usually charge “discount charges”. To continue the analogy above these are in effect the interest charges on the overdraft, and will be based on a few percentage points over base rate, calculated on outstanding funds used on a daily basis.

Non-recourse agreements mean the factor will have liability for any non payment by customers, leaving the business less exposed to bad debts. However a non-recourse agreement will not cover cases where a valid dispute over an invoice exists, and will mean you relinquish all rights to deal with bad debtors, including the right to take legal action.

Recourse agreements are often cheaper and accessible to businesses without significant systems, resources and processes, and allow for the factor to reclaim funds advanced on any unpaid invoices. The terms with the factor will make provision for this, stating an agreed time period after payment was due from the client for recourse to come into effect.

Factorings potential impact on cash flow is obvious, in addition factoring can also provide a number of additional benefits to a business:

• Outsourcing of the sales ledger can be a good idea for some businesses anyway, and factoring provides this function in addition to its other benefits, providing improved customer vetting, financial monitoring and reporting, as well as reducing administration.
• It cannot be ignored that if you deal mainly with small businesses they may prefer to deal directly with the business, however having a third party involved can improve debtor payment simply because the factor is taken more seriously. Remember though the way in which a factor deals with your customers will directly reflect on their opinion of your business, good, or bad.
• A good factor can also be a powerful strategic ally, opening doors to new opportunities and potential clients, as well as providing credibility with third parties such as banks, and financiers.??Factoring is not a cure-all for fundamental inefficiencies in a business’ sales process.

If a business receives a large amount of disputes on its sales ledger then these will ultimately need to be referred back the factor, and make the whole process less efficient, ultimately leading to a loss of confidence by the factor in your business.

Some factors may also try to impose restrictions on the types of customers a business takes on, either through dictating specific criteria for customers and/or a certain percentage of business from different profiles of customers, or by imposing punitive charges on certain businesses that may be perceived as higher risk, and therefore making dealing with those customers less attractive.

Many factors specialise in handling specific types of business, for example startups, or exporters, however businesses that benefit most from factoring will tend to fit some or all of the following criteria:

• The business is not reliant on a single customer for 25-30% of its turnover
• Business is spread across a number of customers, but does not involve the processing of large volumes of low value invoices
• The business has customers who adhere to industry standard payment terms and/or are likely to dispute invoices.
• All agreements with customers are a simple as possible, preferably using standardised terms, and do not involve provision for extensive warranties.

For well established businesses, with a proven track record, invoice discounting may be available. Invoice discounting will generally work on a much larger scale and involves the part financing of the total value of invoices issued in bulk.

Under invoice discounting the business retains full control over its sales ledger but provides the discount finance provider with aggregated data of its customers, invoices issued and payments received, and is in effect an overdraft secured on the total value of invoices issued.

Startups and small businesses can do a form of invoice discounting in house by offering debtors a discount on the value of an invoice if they pay within a prescribed period. For example on an invoice with 30 days terms, a discount may be offered if the customer pays within 7 days of the date of issue.

The later form of invoice discounting may also have an impact on the value added tax liabilities of your business, for example under UK law the amount of VAT on the invoice is calculated on the discounted amount not on the total value of the invoice.

For example if you offer a 25% discount for payment within 7 days then the amount of VAT payable is calculated on 75% of the total invoice value regardless of whether the customer takes advantage of the discount or not.

Supplier financing is another form of alternative financing for businesses, sometimes referred to as reverse factoring or supply chain finance. Often used in manufacturing supply chain finance involves a business (usually a large business) providing its suppliers with low cost finance as part of a flexible settlement system.

The factoring market is serviced by a wide range of providers, some are subsidiaries of the big banks, some are specialists in specific areas. A business debt help factoring broker may be able to advise you on which type of factor may be best for your business, but remember all the points above when making a decision.

Factoring is best seen as a long term commitment and will probably involve considerable effort to implement if it is going to be effective, and as such it is advisable not to make decisions based on cost alone, and as with any such process get good legal advice.

Author Byline:

Jacqui Boughton writes for Business Debt Help the UK’s No1 website dedicated to providing debt advice to UK businesses.

Copyright © 2009 Small Business Resource

Three Powerful Tools To Ensure Good Cash Flow Into Your Business

A VA only charges on the hours consumed on the time required to do such work. Except for the general administrative task such as general work processing, a VA can help you on the following 14 tasks to make your business run smoother and lighten your workload.

1. Desktop Publishing, using desktop publishing software to produce eye-catching documents such as business cards, newsletters, brochures and email champagne.

2. Transcription, if you have a recording of a meeting or an interview, ask your virtual assistant to transcript it into a document.

3. Writing, whether it is writing business letters or writing up articles to submit to directories to expose your business, a VA is ready to do the job.

4. Database Creation & Management, organizing a contact list for your business, such as vendors, customers and competitors.

5. A VA may handle bookkeeping task for your business such as generating and sending out invoices to your clients, keep track of payables and receivables and even paying your bills.

6. A VA can help you answer phone calls and act as your customer service and answer inquiries of your business’ products and service. Your VA may even offer off hours phone answering service, making your hotline 24 hours in service.

7. Website maintenance, keeping the content of your website up-to-date with fresh content and even Search Engine Optimize your website and submitting your website to search engine directories.

8. Email Management, if you decide to go on a trip, business or personal, your VA can handle your email and organize it, so you can call your VA to see what’s new or if any important issues has come up and needs to be settled immediately.

9. Have your VA proofread or edit the documents you have written to check for grammar or formatting mistakes.

10. Translation Service, your VA may speak more than 1 language, that advantage of that and help you expand your business overseas.

11. Computer training or tutoring, to run a business, you will need to acquire skills in various software applications. A VA can pass on their knowledge of the software on a day to day operation.

12. Meeting & Event Planning, in some occasions you would like to host an event for gathering with your clients or even for personal matters such as parties and weddings, your VA can help you organize a guest list and send out invitation, organizing a venue, arrange accommodations, and co-ordinate with any catering services.

13. In most cases, small business owners has a busy schedule and may be hard to co-ordinate by his/herself. A VA can co-ordinate your schedules to help keep your lives organized and running smoothly. Reminder service can also be provided to ensure you to arrive on meetings or events.

14. Social Media Marketing, social media has dominated the internet and the power from social media to build a public relationship with your clients or potential clients. To gain exposure to your business, a VA can help you maintain an updated blog, setup a facebook fanpage and a twitter account to keep in touch with your customers.

By Mak Yeuk Lam Wong

Copyright © 2009 Small Business Resource

Advantage of having a Virtual Assistant for Small Business Owners