Owners of small companies and businesses know that challenges are likely to be met when acquiring capital in meeting shortages in cash flow or when having business expansion. When the financing options of a business are limited such as credits and loans, many opt for accounts receivable financing. However, it is important to remember that prior to making such move, it should be evaluated if such is indeed needed. One wrong move could mean the end of a business especially for those with a small scale capacity. People should know some insights about receivable financing before making it a choice.
Account receivable financing is basically the selling of receivables to a finance or factoring company. The risks are then assumed and offers business quick cash. The value of the amount that the factoring company will have to assign to the account is largely determined by the age of the receivables. Current receivables pay more compared to older ones. One will not be financed when the receivable is more than three months. Accounts receivable factoring or accounts receivable funding is another term for account receivable financing. The following are some of the advantages of receivable funding.
The goal of business is to earn profit. This is the reason why people involved in the business scene must be able to manage money matters efficiently. Having accounts receivable both good and bad points. Good in the sense that the business is running with sales and customers. Bad, because there are liquid assets that you currently do not have in hand.
Moreover, what you need in a business offering credit to customers is a good system or a small business software where you can manage you account receivable as easy as it can possibly be. Collecting amounts and balance due can be difficult if you do not know how much you are owed and the date of its due. It is beneficial in practicing business that you have the information your customer need at your fingertips. It creates a lasting impression, that is a very important spice in long term business relationships.
Image Source: heatspring.com
Here are some steps that will help you list, manage, and collect your account receivables:
Use a Small Business Accounting Software.
Take advantage of the technology by using accounting software that will allow you to track your receivables and collections over a computer or through a smartphone. You can use Quickbooks at your heart’s content, but there are also varied choices available that you can utilize anytime. Continue reading