Have you ever heard the saying that a sale is not a sale until the money is in the cash register? It’s true! You can have all the sales in the world and still go bankrupt because you don’t have the time or ability to collect them. Your accounts receivables are your money, but it remains uncollected. It is the sum of all funds owed to you by the customers you extended credit to.
If you are money poor but accounts receivable rich, there are several options open to you. Besides sticking the invoice into an old sock and waiting for the customer to pay the invoice, consider factoring your accounts receivables to improve cash flow.
Factoring is selling an asset, such as your accounts receivables, at a discounted rate, an entirely acceptable business practice. The sale offers the borrower two options to secure the advance that protects the lender if the client does not pay the invoice through Recourse and Non-Recourse factoring. Each relates to risk.
Now comes the fun. There is some degree of risk connected with all business transactions. Who do you want to assume it? Non-recourse factoring is preferable if you can get it. The factor bears the responsibility for all uncollected funds.
Unless you have previously worked with a factor, finding the right to meet your company’s needs to prevent a costly mistake can be a tedious process. The experts at K-WAM Financial Solutions know who and how to connect you to the right factor to meet all your accounts receivable needs. For additional information, send a message to our team, Click here.