The Right Way to Use Accounts Receivable Financing

There are many ways to get funding for your company and a popular one for companies dealing in large invoices is accounts receivable financing. In AR financing, or factoring, you can use those invoices to get up to ninety percent of the total amount in days while still giving your customers weeks to pay. Once the invoice is paid, you receive the rest of the amount, minus a fee. In some cases, this acts like an advance where the customer still pays you and then you repay the factoring company and in others the customer pays the factor.

Shop Around

Not all factors are the same, it is best to shop around to find one with experience working in your industry, a good reputation and reasonable fees. Reading customer reviews from third-party sites are a good way to learn what people have to say about the company, as well as how the factor handles negative reviews or feedback. Some services will offer factoring for all your invoices and others will factor a couple at a time, so it is important that you make sure the factors you research can meet your needs.

Review Terms and Conditions

Paperwork is important, even with a largely online process like applying for accounts receivable financing. It is important to review the terms and conditions as well as research what factoring is. This can help you find the best financing match for your needs and avoid potential problems. The factor will send you a proposal with the terms and conditions to make sure everyone is on the same page.

Do Not Settle

Settling for a factor with a poor reputation or jumping at the lowest rates available can land you in trouble, especially if they are the ones collecting on the invoice. Less-than-credible factors can charge hidden fees, have poor customer service, or a reputation for premature and intimidating collections practices. These can drive up the good rate you were looking at and even drive your customers away. Taking into consideration multiple criteria when looking at factors can help you avoid these risks.

Accounts receivable financing can be an excellent way to take the worries of invoices off your mind while getting you paid for your work more quickly. This can ease cash flow problems, help you buy supplies for your next big project, and save you the time of making collections calls yourself. It is a good idea to research AR financing and the factoring companies offering it before you sign up so you can get the best fit for your needs.

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