subject: Business Advice - Factoring Solution [print this page] A business finance tip is advice that enables business owners to make better decisions regarding their business finances. This advice can help an individual learn how to earn, spend, and save his or her money in the smartest way possible.
When it comes to managing debt and payments, a good business finance tip is to make sure strict procedures are followed in order to get those bills paid to decrease the chances of negatively affecting a business's credit profile. To keep track of debts, accounting software or an experienced bookkeeper are highly recommended. If there are any private investors contributing to the funds of a business, it is important to keep them up to date on good and bad financial progress. It's also a smart idea to try to negotiate with any person or agency to which money is owed to see if a better rate or payment plan can be worked out.
There are also tips that do not directly involve the finances of a business, but can positively impact the growth of the company. A business owner should hold regular employee meetings to get different ideas on how to improve the company. Being kind to and having good relationships with employees increases job happiness, which leads to increased employee productivity. Remember, a business owner is nowhere without his or her employees, so treat them well.
A factoring solution generally refers to business selling its accounts receivables to another company, called a factor, in order to fund its cash flow needs. The business usually sells the accounts at a discount, and the factor collects the payments from the business's customers.
To engage in a factoring solution, a business either has to accept credit cards as payments or have customers purchasing against credit from the business itself. A factor may also require a business to have been processing credit card orders for a specified amount of time in order to be eligible.
The factoring solution procedures of different agencies vary greatly, but most use the same standard when calculating the discount rates at which they buy a business's accounts receivables. The majority of rates range between two and six percent. The volume of credit sales a business processes determines if a business is high risk or low risk. High-risk businesses have a lower volume of credit sales; therefore their rates may be higher. However, low-risk businesses conduct a high volume of credit sales, which can lower their rate.
Factoring is an alternative solution to a business's need to increase cash flow. Factoring solutions are much more flexible than traditional loan plans, and they do not show up as a liability on the business's records. This keeps equity stable, while more funds flow into the business. Also, it only takes a few days to settle a deal with a factor, which means a business gets the money it needs as quick as possible.
by: Brian Jones
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