Wednesday, 13 January 2021

How to Integrate Factoring Into a Business Plan?

 

If you want factoring to be part of your business plan, but you need to support how viable this decision is, check in this blog how and why this financing would contribute to the correct financial management of your SME.

 It is increasingly common for small and medium-sized companies to look for alternatives to have liquidity and available working capital, that is, money to function on a day-to-day basis.

 This scenario occurs because SMEs sell and meet their business objectives, but in general the payments for these sales are verbal and are late, or they are in invoices for 30 or more days, which prevents them from having liquidity at the current time , gives to know the IV Longitudinal Survey of Companies of the Ministry of Economy.

 How to solve this situation? What alternative to choose to avoid running out of cash? Digital factoring is a fast, secure financial tool that does not put you in debt with the banking system and that when included in your business plan delivers great benefits.

 What specific benefits does digital factoring bring to your company?

 Factoring is a well-integrated financing mechanism that improves the financial management of your company, maintains orderly finances and allows the achievement of administrative and accounting objectives .

 If you opt for digital factoring as a financing alternative:

 1. You get liquidity easily and quickly . You don't need to wait 60, 90 or more days to receive payments from your accounts receivable. You make the request and once approved, the money is transferred to your checking account within a period of approximately two hours.

 2. You transfer the responsibility of the payment of the factoring operation that you request. If the operation is carried out with Achievements Financial Services and it is defined as "No Responsibility", it is your debtor client who has the responsibility for non-payment or delays in the collection of pending invoices.

 3. You self- manage your online operations . You do not need to go to an office or print papers, you save time and cost because you quote online, transfer your documents, monitor your operation, get an approval response to factoring and even receive information on the collection of your documents.

 What steps should you take to include factoring in your business plan?

 Digital factoring can be included within the financial management factors of your business, where you save operating expenses by managing everything online and you only have to consider the cost of providing the service, whether monthly, quarterly or according to how you define that you will need to inject liquidity into your SME.

 Therefore, to get the most out of this tool, you should consider two fundamental steps in your business plan :

 1. Include it in your operating budget

 By making it part of your accounting, you can constantly quote and consider the service formally as an operating expense to include in your cost structure.

 Although this expense is lower than what the interests of a conventional loan represent and also allows you to save on collection management, it is an expense that must be paid with the same cash that your SME tries to keep stable.

 2. Establish the factoring operations in the cash flow

 Your SME must plan and establish in its business plan the income and expenses for each period, for this it is important to do an analysis of the liquidity of your business, identifying all the income that the company receives monthly in cash or in documents such as invoices, and also the expenses you have.

 If the flow of income and expenses does not coincide, that is, there is not enough liquidity in any month or period to meet all the commitments, you include the factoring process in those instances, obviously having previously defined everything for the correct cash flow .

 Through factoring you solve the lag you have, for example, between the days of payment to your suppliers and the time of collection of the invoices of your clients, as High Technological Services did. Check out his success story here .

 Factoring: A great ally for liquidity management

 This financing mechanism can be seen as a formula to cover temporary liquidity needs and not as a momentary alternative to inject money with which you do not really have now and will not have in a few more months.

 Take advantage of its operation to better manage your available capital, advance the payment of accounts receivable and to cover temporary cash deficits.

 If you add it to your business plan as a monthly or quarterly item, you will not have cash problems and you will achieve the support you need to operate daily or even to focus on the future growth of your SME.

 

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