Cash flow is the lifeblood of any business. Invoice factoring Christchurch is a practice that many companies are turning to so that they can unlock the money that is currently in their accounts receivable. A thriving order book is useful, but if those clients and customers are not paying on time, or if you cannot complete the work for one client until another client pays, then your business could be on the verge of collapse.
This is a lesson that many businesses learn the hard way in their first few years, and the issue of unpaid or late-paid invoices is something that is crippling many Australia and New Zealand-based businesses. In the long term, it is often possible to build up reserves and implement a clear and strictly enforced payment policy. In the short term, however, many businesses need to look to other strategies.
Get Paid The Money You Are Owed, When You Need It
The idea behind invoice factoring Christchurch is simple. The invoices are sent through a factoring company that will pay out a percentage of what is owed immediately, and will hold the rest of the invoice value until the invoice is paid out. They will charge a fee for each invoice. The factoring company handles debt chasing and makes sure that they get paid.
For companies without large reserves, using an invoice factoring Christchurch such as Asset Factors could be a powerful lifeline. If you have staff that you need to pay, and suppliers who want 30 to 60 day terms, while your own customers are putting off payment until the last second, or sometimes not paying at all, then you have limited options. Taking out a traditional loan may work, but it requires a good credit rating and a young SME may not have that.
Is Factoring Your Invoice Worth The Money?
These companies charge a nominal amount per invoice, so if you use one then you are paying for the privilege of getting the money early. It is up to you as a business owner to decide whether the fee is worthwhile. If you are going to lose staff because they aren’t getting paid, or be hit by late fees for unpaid bills, then this kind of service could save you money.
In general, invoice factoring Christchurch should be cheaper than a traditional loan, and also cheaper than dipping into an unauthorized overdraft. In the long term, your goal may indeed be to have sufficient reserves that you don’t need to use a factoring company. The service is invaluable for those who are building capacity, however, and it gives you peace of mind that you will be able to pay your bills when they are due.
Take a look at your business plan and your cashflow. If one of your regular payers failed to pay on time, would your business survive? If not, what can you do to secure your cash flow in the medium to long term? Think of factoring as an investment in stability for your growing business.