When people talk about factoring arrangements, the focus is often on creating a more efficient cash flow. While that aspect is important, choosing to establish a relationship with a funding partner also paves the way for streamlining the business model and freeing more of that cash flow for growth opportunities. Here are a few examples of how invoice factoring can aid in that streamlining process.
Electronic Deposits Make Life Easier
The funding partner provides a large payment soon after the batch of invoices is accepted. Later on, smaller disbursements are made to the bank account designated by the business owner. Since all invoice payments are sent directly to the funding partner, there is no need to set aside time to prepare checks for depositing, create a deposit slip, and make a trip to the local bank.
Simplifying the Receivables Posting
One aspect of the relationship that may be overlooked at first is how factoring can simplify the application of payments to outstanding invoices. Many funding partners provide the opportunity to download a file containing all the data about payments received on a daily or weekly basis. Often those report formats can be integrated directly into the program used to create the invoices in the first place. The result is the automated posting of those payments rather than someone taking the time to post each payment manually. Thanks to this approach, it’s possible for the accounting team to spend more time on other essential duties.
Taking Care of the Collections Process
Since a funding partner is basically buying each batch of invoices, it makes sense for the partner to address any collection issues. That includes contacting customers when their invoices remain unpaid after 30 days. Those notifications continue as the invoice continues to age until the customer either pays the invoice or is turned over to a collection agency.
Thanks to the ability to hand this issue off to the funding partner, employees in the accounting and customer service teams can spend their time taking care of other duties and not have to be concerned with attempting to collect on a past due invoice.