Factoring of Accounts Receivable is a financing alternative widely used in the manufacturing and transportation industries. But is it a good option for the service industry?
The positive experiences of many companies show that Factoring is indeed a solid financing option for the service industry, including:
- Providers of IT services
- Security providers
- Staffing services
- Engineering services
- Maintenance companies
What Is Factoring?
Before we go into the details of why factoring is a good option for the service industry, let’s do a quick recap of how factoring works.
When you decide to Factor your unpaid accounts receivable, you are essentially selling them to a company called a Factor. The Factor will give you cash immediately and then will collect the payment from your clients in exchange for a small fee.
This is a smart way to eliminate the 30 to 90 days you usually have to wait for your clients to pay you, ensuring that you have a robust cash flow to cover all the needs of your organization.
Take On Large Jobs
Most companies in the service industry offer flexible credit terms. This strategy is convenient for customers, but it may create cash flow problems that can prevent your company from taking on large jobs because you don’t have the funds to handle them. Factoring solves this common problem by allowing you to access immediately the cash tied up in your accounts receivable. This way you maintain your good relationship with your current customers while moving your business forward toward more ambitious goals.
Add More Employees
A similar principle applies to your workforce. How to add more employees to your company if your cash flow is unpredictable? This is a particularly important question because meeting payroll is often the highest priority for companies in the service industry. Luckily, Factoring comes again to the rescue, giving your company the predictable cash influx it needs to thrive. With a larger team, you can run more shifts, offer better services, and tackle major accounts with more confidence.
Suppliers are another important aspect for companies in the service industry. For example, it may be complicated to pay suppliers upfront when you have to extend credit to your clients. What to do if you don’t have enough cash reserves? Also in this case, Factoring provides you with the capital you need to clear a hurdle that might otherwise slow down your business.
Turn Your Invoices Into Immediate Cash With ACS Factors
At ACS Factors, we help you get the capital you need to move your service business forward. We are located in Upland, California, and have many clients in the distribution and logistics corridor which includes Ontario, Riverside, Fontana, Jurupa Valley, and Moreno Valley.
Reach out today by email (email@example.com) telephone (909-946-5599), or through our social media accounts on Facebook, Twitter, and YouTube, and start converting your accounts receivable into cash today!