Sell Accounts ReceivableSell Accounts Receivable: When you perform some type of work and invoice afterwards, you are, in effect, extending credit to your customer. If your invoice is likely to be of high dollar value, you should consider running a credit check on the business before you start work. This will reveal whether the company you're about to do work for is creditworthy or is in financial trouble. By doing so, you will be able to: a) avoid lots of problems later on; and b) possibly position yourself to sell accounts receivable from this company. Making every attempt to avoid financial trouble by not dealing with troubled companies is a business “no-brainer”. Yet, each day, otherwise smart business men and women make this mistake. They want business so badly that they do not stop to do their due diligence. And when they finally “discover” that much of their cash flow is tied up in their accounts receivable, only then do they think about the possibility of selling their accounts receivable. When they engage a factor, and that factor performs his due diligence on the client’s debtor companies, only then does the client realize the mistake he or she has made in doing business with non-creditworthy customers. The business solution: sell accounts receivable. That's right. Get “smart” about factoring and the necessity for doing business with creditworthy companies as early as possible – well before entering into any business arrangement. The main question you must answer: Is factoring – even a remote possibility to sell accounts receivable - right for my company? The answer o this question is unique for each company. In arriving at that answer, each business owner should ask him or herself at least the following questions: - Does your business want to offer credit and flexible terms to large buyers to increase sales? - Do you have invoices from credit worthy customers? - Are debtors taking anywhere from 45 to 120 days to settle their accounts; thereby, using your firm as a surrogate line of credit? - Are you spending too much time and resources collecting on accounts receivable which could have been used for business growth? - Are your customers taking too long to pay their invoices? - Are a large amount of your debtors turning into bad debts? - Do you need funds to meet payroll, expand your business, make needed purchases, etc? - Are your long billing cycles resulting in impaired cash flow cycles? - Do you need a more predictable, smoothed-out cash flow? - Do you need an uninterrupted stream of operating capital? - Do you have at least an adequate credit rating? - Do you have less than stellar credit which prevents you from securing a bank loan? - Have you been turned down for bank financing? - Do you need an immediate infusion of capital, sometimes as little as in one day? - Do you need money for your company’s survival, or even to take advantage of an opportunity? - Is your business ready for more money and expansion? - What are the current economic and industry conditions? Is now a favorable time to acquire more financing? - Have you explored all possible sources of small business financing? - Do you have contracts with bureaucracies such as local, state and Federal government entities? - Are you a newly-established business entity? - Does your financing strategy match with your business plan?
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