Building Cash Flow
Invoice Factoring Building Cash Flow
Author: Stephanie Clarke
Date posted: 11.18.22

The emerging furniture business, located in Dallas, Texas, is making a name for itself in the market with sleek, modern designs and sustainable wood choices. Without the use of a wide variety of tools, each component is painstakingly produced by hand. Following the publication of a recent article in a magazine highlighting the company, an avalanche of orders has occurred. Because there were now more orders, additional workers had to be recruited.

While most consumers promptly fulfill their bill payments, some overlook their placed orders, potentially impacting the crucial task of building cash flow. Consumers must provide an initial down payment, comprising just fifty percent of the total price, and the remaining balance falls due upon the delivery of the finished product. This challenge further contributes to maintaining and building cash flow. The payroll department struggles with weekly employee payouts as certain invoices surpass the 30-day deadline. This underscores the urgency of promptly addressing these issues to ensure uninterrupted cash flow building and to avert potential sales decline.

The owner aspired to gain a deeper understanding of available loan options. They recognized incoming revenue and their ability to repay once settling the invoice. However, they faced a challenge due to lacking necessary equipment and assets for use as collateral—typically required for most loans. Additionally, they aimed to steer clear of an extended repayment period spanning several years.

Building Cash Flow

When considering all their available choices, they came across invoice factoring. It allowed them to borrow money against unpaid invoices to pay their employees. There was no need to make payments as the finance charge was deducted from the invoice when it was paid, no collateral was needed as the invoices themselves were used, and if a customer didn’t pay the invoice, the company would sell the furniture elsewhere and repay the loan that way.

 

With a successful sales year, the application process was swift, yielding a prompt response. While requiring approval for both business and customers, the seamless process took some time. Upon submitting invoices, they received their maximum advance based on totals.

Ultimately, they succeeded in borrowing against eighty percent of their past-due invoices. The reasonable factor rate solidified it as a sensible and cost-effective choice for them.

 

During the initial sixty days, they efficiently resolved all outstanding accounts and retained ample funds to hire a few additional employees. The company’s recognition of an expanding customer base and substantial growth resulted in the determination. This determination made relocating to a more spacious warehouse imperative.

 

While a small number of clients consistently made late payments, they maintained an understanding that no undue concern was necessary, and they could leverage invoice factoring to their advantage.

Building Cash Flow
About The Author | Stephanie Clarke

Stephanie has a bachelor's degree in psychology and has been a professional writer for over 15 years. Her client list includes New York Times bestselling authors, publishing houses, prominent public figures and successful business owners. She resides with her family in Florida.

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