Many firms face challenges when planning for growth. Researching finance opportunities that leverage invoicing and credit can help provide higher return on investment and free up valuable time. At some point, nearly every business finds themselves in a position with limited funds on hand. This situation can be difficult when facing unanticipated expenses and liabilities. Ensuring access to capital now, and putting better practices and processes in place, can mean success today and improved financial stability long term. At Plus Funding Group, our goal is to guide business owners towards success through invoice factoring and other methods to leverage revenue.
Extending credit through invoices is common, but may not be practical for every business. To decide if extending credit is right for your business, you must weigh the associated rewards and risks.
The option of credit enables customers to focus less on prices, enhances customer relations, and has the potential to generate more sales.
Extending credit costs money.
Selling on credit means the payment is not in hand and will need to temporarily recoup the cost from other areas of your operating capital.
If customers don’t pay, you could be in for a long settlement process.
Extending credit could be the factor that keeps your business afloat if it makes it easier for your customers to buy from you. Nevertheless, if it isn’t necessary it may not be worth the extra time and paperwork.
At Plus Funding Group, we understand the risks associated with extending credit to new customers. Our team is well versed in performing the due diligence to determine credit worthiness that can eliminate credit write offs and slow payment before it happens. Partnering with us gives you access to the tools and background data you need to make intelligent business decisions and carefully assess risk.
The Plus Funding Group offers quick, efficient, and professional services. Learn how our services can enhance your bottom line today.
We have all been told year-in-year about making New Year’s Resolutions. Giving up smoking, losing weight, eating your vegetables…all good stuff! But what about making some New Year’s Resolutions to better your business?
What’s on your list of business resolutions for 2014?
Resolutions, if carefully thought over and properly planned, can be a powerful tool to boost your business in 2014. Let’s have a look at just a few resolutions you can make to get your business off to a flying start this year.
Get New Customers
Sometimes, we spend too much time looking after our existing customers; we look after their needs; we ensure that they are consistently happy and we are always looking for the next sale. However, we also sometimes forget that a percentage of customers will always drop off and before you know it, your customer numbers and sales are down.
Never forget that there is a new batch of clients out there who are desperate for your products, and all you have to do is ask for their business. So, to gear yourself up for a renewed campaign, think about these aspects of your business.
Take a fresh look at your advertising material. Does it look dated? Is it designed to attract new business? Do you do enough advertising?
Could you improve your networking skills? Find out if there is a business club or organization near you, and join! If there isn’t one nearby, form one on your own. It’s almost guaranteed that there are a great deal of like-minded business professionals near you who are seeking the same type of networking connection, and would happily participate. Get your business colleagues to a local meeting place and ask that they bring along one other business person from another organization to increase your networking diversity pool.
Ask your customers for referrals. If they’re satisfied with your service, then they should be more than happy to provide you with some introductions.
To help get started and give you direction, set a clear, achievable goal on how many new customers you are going to get each month.
Keep Your Existing Ones
In your quest to get more customers, don’t forget your existing ones. Yes, we did stress the importance of cooling off them and searching for new clients, but the key to success is balance. Resolve to call all your key customers at least once a quarter. You don’t have to try and get an order, just show that you have not forgotten them.
If you have recently launched a new product or service, have you told your existing customers? Are they totally up to date with your product range?
Think about introducing a loyalty bonus or gift. Reward those customers who have been with you for many years or have placed significant orders over the last year. Just say thank you for doing business with you.
Look at Your Expenses
2014 is looking to be a challenging year for businesses and a keen eye on your outgoings could help you. When did you last review your monthly expenses? Set a resolution to look at your overheads every month. Can you reduce your electricity bill or phone by either being more efficient or changing suppliers?
If you have a range of suppliers, have you recently re-negotiated terms? Are you still getting a good deal, or could you do better?
Resolve to look at your bank charges at least once a year. Does your bank offer you a competitive deal? What are their competitors offering? Also, check whether you are getting the best deal on all your insurance requirements. Go and see a broker, or spend some time online getting some quotes to compare.
Keep an Eye on the Cash
This year, resolve to keep a meticulous watch your cash flow. With a generally tightening of available credit in the market, you may find your larger customers squeezing you on payment dates. Make sure you get your invoices out on time and that overdue payments are promptly chased; the more latitude you give means less profits for you. If money is tight, consider purchase order financing, which is a short-term commercial finance option that provides capital to pay suppliers upfront so your company can avoid depleting your cash reserves. Growing your business should not be limited simply because of a few late-paying customers.
If you are facing a liquidity crisis, make sure you are making full use of credit terms offered by suppliers. Could you negotiate even more favorable terms? Even stretching the payments you have to make by two or three days could make a huge difference.
Remember, it’s cash, not just profit, that keeps your business going.
Have a Radical Re-Think
Are you hanging onto a slow-moving product from your business in hopes that it will “take off” next year? Rather than relying on a possible surge in sales, take the time to reassess your product and determine whether or not it’s worth the continuous effort to spend money on production despite seeing little return. Do you have suppliers who are constantly delivering late or have quality problems with their goods? If that’s the case, resolve to search for new suppliers to can deliver quality products on time.
Over the past year, have you been spending a lot of time chasing a potential new customer? You’ve paid for the lunches, paid for a night to the theatre, even nominated him to join your favorite club, but still no business. Is this year the time to accept that they may not do business just yet? Resolve not to waste your precious time and effort chasing no-hopers.
Focus on Growth
Business growth is at the top of the list for many, and invoice factoring is one of the easiest and quickest ways to do so without the need for a bank loan, since your own invoice accounts receivable are turned into cash. By accelerating your business’ cash flow, you provide your business with access to funds that would otherwise not be available during a “normal” billing cycle. Financing should never be a bottleneck to the growth and expansion of your business.
Commit to a Plan
If you have decided to take on one (or all)! Of these New Years resolutions, to give you focus and a goal to aim for, write them down. Prepare a plan listing all your resolutions and detailing the actions you have to take to achieve them all. Then, resolve to review your plan at least once a month.
PFG is here to help make 2014 your best year for business growth yet. Contact us to get started!
We would like to share a case study that showcases Plus Funding’s ability to help companies succeed and thrive from our factoring services. Plus Funding Group assisted a company that imports high-end women’s shoes.
Thanks to purchase order financing, one company is now selling products at large-scale department stores like this!
When PFG began working with this company a year ago, they were making about $200,000 a season with $800,000 annually. The company sold their products on Amazon and some smaller boutiques, and used manufacturing plants in both Spain and China. The annual cost of production was around $120,000.
However, the company needed to pay 30% of their production cost up front in order for their producers to begin work. The other 70% was paid when the goods were ready to be shipped. These conditions meant that the company was required to pay the $120,000 production costs before they were even able to sell the shoes. Without some sort of financing options, this company would be tying up valuable cash in the form of inventory.
PFG made this company more liquid by providing purchase order financing. What PFG did for this company was provide the manufacturer with the 30% up front costs of the goods, and then gave the manufacturer the remaining 70% production costs that were needed to ship the shoes. This allowed the goods to reach the United States where they were then shipped to distribution centers and sold to customers. PFG then collected on the invoices from the customers on the behalf of this company.
Once the goods were shipped out, PFG did the necessary factoring on the company’s invoices and collected the monies from all of the company’s clients. This resulted in a gross profit of $80,000 that was collected, and these funds were sent back to the client company. Initially, the company had $200,000 in purchase order financing before they got started. They also needed the $120,000 in other costs such as production and freight to fulfill their purchase orders.
PFG initially financed the manufacturing costs to the factories, freight, etc. The whole process from purchase order to delivery was 60 days, and the whole production cycle from purchase order to finance was 120 days. In the meantime, the company was able to generate $80,000 (minus PFG’s fees, which were between $10,000 – $20,000) and essentially get their profit without putting down any money from their own profits.
Prior to PFG, this company was only able to handle small orders. After PFG’s help, the company is expected to make between $400,000 to $500,000 in business in the Spring 2014 season alone. Now that they have the financing that they needed, they are able to be more aggressive and go after bigger customers. This has caused a shift in the customer base and will allow this company to service larger clients like Nordstrom and Hautelook.
Net profit for this company has gone from $80,000 to $200,000. PFG still finances the whole production including the freight, with the time cycle remaining the same. This company now knows that they can finance their operation successfully and because of this are now driving growth. The only constraint to their growth will be based on sales and production. Financing should never become a bottleneck, which is why PFG is there to help businesses such as this one grow and thrive.
Healthy cash flow is the lifeblood of any business. Too often, small businesses find themselves so cash-strapped that interferes with their growth as well as day-to-day operations. Fortunately, there are steps you can take to improve your cash flow management. Here are five strategies to help you manage cash effectively:
1) Keep Track
The first step in getting control of your cash flow is to understand your cash flow cycles. Track your cash flow projections by establishing your starting balance and then plotting out, month by month, when you expect to receive cash in and when you expect to pay cash out. You can find inexpensive software or free templates online that make the process easier for you. By doing this, you may foresee future cash-flow bottlenecks and you may be able to manage it better.
2) Collect Receivables
A cash flow projection is not factual document. It is a set of guesses, based on assumptions that your customers will actually pay on time. One of your biggest challenges may be to collect in a timely manner. The first step is to make sure you are invoicing customers regularly, predictably, and with clear terms. You can make it easier to get your receivables into your bank account by using a service that provides online invoicing and payments. Many of these services, such as WePay, FreshBooks, or PaySimple, offer automatic invoicing and invoicing reminders. Another way to collect is to set up a lockbox service with your bank for those people who pay by check. A friendly phone call to your customers sometimes goes a long way in getting paid on time. If you are a service provider, consider taking deposits and payments up front before you start the work.
3) Establish Discounts and Penalties
Offer discounts to people who pay early. Some of your customers will find this valuable. If you have chronically late-paying customers, try to offer them an incentive to pay sooner. If they are more than 90 days past due, offer them a discount to settle immediately. This may be less expensive or more effective than hiring a collection agency, and getting some cash from the delinquent customers is better than not collecting at all. You can also attach a penalty for late payments as long as you are explicit up front about your terms. Customers may be incentivized to pay on time just to avoid the penalty.
4) Control Payables
When people think about cash flow, they tend to think about receivables first. It is important to manage payables as well. Take full advantage of payment terms that your creditors offer. Pay your bills when they are due. If your creditor is offering an early payment discount, calculate whether or not it makes sense to pay early. It may be more valuable to you to have the cash in your account until due date than it is to get the discount. Make sure you pay your employees first—they are your most important asset. And if you can’t pay others, let them know as soon as possible and negotiate alternate terms up front.
5) Manage Your Shortfall
Even the best businesses run into occasional cash shortfalls. As a matter of fact, growing businesses are especially prone to gaps as they invest in new property, supplies, infrastructure or services in order to grow. If you have taken all the steps above, not only do you have a far better chance of predicting a potential shortfall, you are also in the best possible shape to obtain funding. You can approach bankers or suppliers to extend credit to you. Or, a creative approach to funding your current operations without borrowing by using alternative lending solutions like factoring & purchase order financing.
Does cash flow management take a lot of discipline and effort? Absolutely. But these techniques will help you obtain healthy and long-lasting business success.
