Why Traditional Factoring Is Safer Than Reverse FactoringMar 31 2020 in Invoice Factoring
Factoring has long been a popular financing option for companies who need to improve their cash flow. For 30 years, BCashflow Positive has been proudly helping clients get access to the money they’ve already earned.
Invoice factoring should not be confused with reverse factoring, which is also known as supply chain finance. In this scenario, the company uses a reverse factoring partner, which could be a bank or an alternative lender, to help pay suppliers’ invoices.
What Is Factoring?
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its accounts receivable to meet its present and immediate cash needs.
Factoring vs. Reverse Factoring
With factoring, the factoring company advances you with a percentage of your sales invoice upfront to help you improve cash flow. Instead of waiting up to 90 days for your clients to pay, you can release immediate cash from your invoices.
With reverse factoring, the bank or lender commits to pay your suppliers’ invoices at an accelerated rate in exchange for a discount. The process is still initiated by you (the customer) to help your suppliers finance their receivables.
Reverse factoring fees are often higher than traditional factoring, as a discount is applied for the customer while the bank/financier also charges their fees. So, although the supplier receives the full amount upfront, it is still less the agreed discount and funder fee.
The Australian Competition and Consumer Commission is looking more closely at reverse factoring, and Small Business Ombudsman Kate Carnell has initiated a formal review of reverse factoring. There is some concern that companies are not disclosing their reverse factoring practices to their shareholders. Thus, it makes those businesses appear to be doing better than they actually are. When Carillion, a British government contractor, collapsed in 2018, it did so under the weight of extreme debt—and it had been using undisclosed reverse factoring.
Given the uncertainty of the future of this practice and the confusion it can create on paper, traditional factoring is a much safer option to achieve what is basically the same result: improved cash flow.
Factoring has a long history dating back to ancient Rome. It is widely used by businesses around the world to improve cash flow and it is not currently under Government scrutiny. Factoring also has many other benefits which are explored further throughout this article.
How Can Businesses Use Factoring to Improve Their Cash Flow?
Maybe you’ve already experienced this: you’ve made dozens of sales, but you have no cash to show for it because all those clients are sitting on their invoices—and may take 30, 60, or even 90 days to pay them. In the meantime, what are you supposed to do about ATO obligations and your own outstanding invoices? How can you hire new employees or develop new products? There is no certainty as to when your clients will pay their invoices.
That’s where factoring comes in. You can have the money you’ve earned within hours of invoicing your clients. Then, that steady cash flow can keep your business growing.
How Does the BCashflow Positive Factoring Process Work?
The BCashflow Positive process is simple and fast, giving you access to your money in as little as 4 hours. You can get your invoices funded in 3 simple steps:
- Invoice your clients and send us a copy.
- BCashflow Positive will advance up to 90% of the invoice face value, less 1.8% for the first 30 days, in as little as 4 hours.
- We will credit you the remainder of the invoice when your client pays us, less any accrued fees.
The BCashflow Positive fee structure is straightforward and transparent. Our calculator makes it easy to determine the fees you’ll pay on each invoice you send us—so there are no surprises. Stay in control by choosing which invoices you want to factor. We also don’t require property security or quarterly audits.
Advantages Compared to Other Business Funding Solutions
With banks tightening their credit policies, businesses may find it harder and harder to acquire traditional business loans. The application process can also be onerous and time-consuming.
A line of credit or overdraft may also not be enough to service ongoing business expenses, depending on the limit. If your business borrowings are secured by property or your home, you are also at risk of losing everything if something goes wrong.
Factoring is a faster, more accessible funding solution for many businesses. The application process is simple and there are fewer restrictions than what you’ll find with most banks.
Factoring Your Invoices With BCashflow Positive
With BCashflow Positive you choose which invoices to factor. Additionally, since the money you receive is based on sales you’ve already made, there is more peace of mind.
With three decades of experience, BCashflow Positive has become the leading company in Australia, providing businesses with steady cash flow. We prioritise customer service and love helping fellow Australian businesses succeed. When you work with us, you’ll enjoy:
- A response to your application within 24-48 hours
- Advance up to 90% of the invoice value to you in as little as 4 hours
- Upfront pricing structure—no hidden fees
- No quarterly audits or property security
- Friendly, professional, and dedicated service throughout our relationship with you
Factor the invoices you want, when you want, and get that cash flowing through your business. Use it to pay taxes and suppliers or take your business to the next level.
Not sure if invoice factoring is the right choice for you? Contact us today to speak to a local cash flow expert. Small to medium businesses and even start-ups that turnover $100,000 to $3,000,000 a month can benefit from factoring. Whether you work in recruitment, mining, manufacturing, transport, or any other industry, we can help you determine if factoring is a suitable funding solution for your business’s cash flow needs
What to Look for When Comparing Debtor Finance CompaniesFeb 26 2020 in Debtor Finance
Not all debtor finance companies are the same, and the one you choose can have a big impact on your business. Navigating the terms and fees can feel overwhelming, especially if you are unclear about how this process can help your business grow and thrive. It’s important to understand exactly how debtor finance works and what an invoice finance company can do for you.
Before you choose a company to partner with, let’s take a closer look at how debtor finance works and what to consider when choosing between debtor finance companies:
How debtor finance companies can help businesses
For new businesses, small businesses, rapidly growing businesses, and in fact for most businesses, cash flow can become a problem. One of the main causes of cash flow issues is slow payments. Small and medium businesses are losing access to as much as $7 billion a year because bigger companies are not paying their bills on time, according to a study conducted of more than 150,000 Australian businesses. The study also found a link between long payment times and slower growth for small businesses, with 46 per cent failing in their first five years.
Your business might have made 100 sales, but some customers can take 30, 60, or even 90 days to pay, so your cash is tied up in unpaid invoices. The lack of cash flow can also prevent your business from growing as you can’t fund the next production run or hire new employees to support the growth.
That’s where debtor finance companies can help by advancing funds against unpaid invoices, giving you immediate access to cash.
How debtor finance works?
Debtor finance companies help businesses to improve their cash flow by shortening their normal receivables cycle. Businesses can use their outstanding invoices to get immediate cash instead of waiting up to 90 days to get paid.
BCashflow Positive debtor finance is as easy as 1 2 3:
- You invoice your customers as usual for the goods and services they receive and send BCashflow Positive a copy.
- BCashflow Positive will credit your account with up to 90% of the invoice value, in as quick as 4 hours.
- Once the customer pays us, BCashflow Positive will credit your account the remaining 10% less any accrued fees.
Benefits of using debtor finance companies
Partnering up with a debtor finance company has many benefits:
Pay bills and operating costs on time, avoiding costly late fees and perhaps qualifying for discounts for early payments or large-quantity orders.
Grow your business by expanding your operations and hiring more staff.
Offer various payment terms to customers, which could increase sales for customers who need flexibility.
Avoid using personal assets to fund your business.
What to consider when choosing between debtor finance companies
After you have narrowed down a few debtor finance companies to consider, take a close look at their websites and call them to get a gauge of their service level and professionalism.
Below are key things you should also look for when comparing debtor finance companies:
How long have the debtor finance companies been in business?
Experience matters and staying power shows that a company is providing a service that is serving their customer’s needs.
BCashflow Positive has been serving Australian businesses for more than 30 years. From wholesale and manufacturing to recruitment, transport, mining, business services, and more, companies in Sydney, Brisbane, Perth, Melbourne, and beyond have relied on us to cover the gap created by slow payments to keep them in constant cash flow.
What fees do debtor finance companies charge?
This information should be clear and straightforward, and if you are having trouble determining how much the debtor finance company charge, they are probably not the best company to work with. Transparency is important since hidden fees can add up and hurt your bottom line.
At BCashflow Positive, we are upfront about our fees and there are no costly surprises. Our pricing structure is simple: we charge 1.8% for the first 30 days and 0.06% per day thereafter for up to 90 days. What does that add up to for you? You can use our calculator tool to find out.
How soon will your invoices be funded?
The whole purpose behind using debtor finance companies is to get your money quickly so you can get on with running your business. To that end, you should look for a company that can get your invoices funded fast.
BCashflow Positive can fund your invoices in as quick as 4 hours and will keep you updated throughout the process.
What is the process to get your invoices funded?
The process should be clear and simple; avoid debtor finance companies that try to make it more complicated than it has to be.
BCashflow Positive makes the process of getting your invoices funded straight forward. Simply send us copies of invoices you want to be funded. Our team will process your invoices and reach out to you should they have any questions. We fund the invoices in as quick as 4 hours and send you a report outlining what has been funded and any associated fees.
Why BCashflow Positive debtor finance?
In the end, choosing between debtor finance companies is simple when you focus on experience, transparency, and top-notch customer service. At BCashflow Positive, we pride ourselves on all three, and we have three decades worth of happy customers in a wide range of industries to back it up. We believe in close-knit working relationships, so you will be working with someone who will truly know your business and your story.
We love helping companies thrive, and we offer flexible customised solutions that allow you to take your business to the next level. A lack of cash flow is no reason for your business to struggle. Contact us today to learn more about how we can help your business. Or call 1300 937 292 to speak to one of our local cash flow experts.
5 Ways To Avoid Cash Flow Problems In Your BusinessJun 29 2017 in Business Cash Flow
Until you can generate sufficient cash reserves to allow you some breathing room when it comes to expenses, cash flow finance should be at the front of every business owner’s mind. These simple and practical tips can help you avoid being short on cash, even though a big cheque is on its way to you.
Create a cash flow forecast
A cash flow forecast is a prediction of all the income and expenses for your business. Forecasts can cover a few months to a few years, and you’ll be able to put one together with the help of an accountant.
These forecasts can be used to identify when your business will run at a cash flow deficit or surplus, as well as how your predictions and budgets line up with actual income and expenses. If your bank statement doesn’t meet your predictions, use the following tips to address any issues and improve your business’s cash flow.
Limit bad debts
If your client can’t pay an invoice or outstanding account, you may be in cash flow trouble. To limit losses, try introducing a maximum on store credit accounts, or consider conducting a credit check on prospective customers.
At BCashflow Positive, we provide credit checks on prospective customers to our clients free of charge. If one of your clients is regularly late to pay invoices, politely ask for at least partial payment upfront and reconsidering whether to continue to trade with them.
Buy stock often and in smaller quantities. Rather than buying all of your supplies in bulk, consider buying smaller quantities more frequently. While not netting you the same ‘in bulk’ savings, this can help your cash flow by spreading your expenses out more regularly.
Reassess your expenses
If your cash flow forecast brought your attention to excessive expenses, be sure to investigate these to see how you can save. When it comes to bills and utilities, paying in monthly installments rather than quarterly or annually can help you avoid large outgoings.
If your energy bills are higher than you expected, look at installing energy efficient appliances or looking for an energy plan with better rates or discounts to help you save money. Finally, always shop around to see if another supplier can cut you a better deal on a product you buy regularly.
Consider Cashflow Finance
If you’re planning on expanding your business, or need working capital so you can fill a big contract or order, consider services like Cashflow Finance. Cash flow financing allows companies to finance slow-paying accounts receivable, by passing on outstanding sales invoices to a cash flow finance company ( such as BCashflow Positive) for immediate payment. You can get up to 90% advance on the face value of your invoices in as quick as 24 hours.
Call us now on 1300 937 292 to find out how, or fill out our quick contact form and a cash flow expert will be in touch shortly.