For businesses that issue invoices with staggered payment schedules of 30 days or more, keeping track of outstanding client accounts can take up a lot of time and other resources. Sending out reminders, performing collections, and more can sometimes feel like running in place, and when business owners are chasing revenue from sales it keeps them from focusing on growing their operations. There are a few methods for getting receivables under control to reduce the strain placed on internal resources and boost cash flow.
Down Payments on Sales
Requiring clients to make a down payment is becoming more popular in some industries, and not just for unusually large sales. Clients who already have money down on a sale are more likely to pay off the rest instead of having a lingering balance. Keep in mind that suddenly switching to a down payment policy might put off some regular clients. Also, not all businesses can pivot to this policy because it would go against standard business procedures for their particular industry.
Charging Fees for Overdue Receivables
To ensure prompt payments and minimize the need for collections, some businesses charge late fees for overdue receivables. When clients know that additional fees will be triggered when an invoice ages out, they are more likely to pay on or ahead of schedule. It should be noted that businesses that charge late fees must have signage indicating the policy at the front of the office, on the invoices themselves, and the policy must be communicated to the client at the time of the sale. This provides additional legal protection for your business.
Invoice factoring helps businesses get receivables under control on a number of fronts. First, invoice factoring is a fast solution that eliminates staggered payment schedules. When invoices are submitted for factoring, businesses can typically access cash within 24 hours. Second, the turnaround on invoices is very fast with factoring services, so receivables do not have a chance to age out. This means businesses do not have to perform collections. Third, invoice factoring helps to automate business accounting by freeing up internal resources that are usually used to track staggered payment schedules across multiple clients.
Single Point Capital is a leader in invoice factoring solutions. We provide same-day factoring services, as well as tools that businesses can use to manage their accounts and free credit checks on their clients. Contact Single Point Capital today and find out how our invoice factoring solutions can help automate your business accounting process.