If you own and operate a small business, then you’re always on the lookout for ways to improve your cash flow without increasing your overhead costs. You know that having the capital you need when you need it can mean the difference between success and failure, especially for businesses that are just starting out, or who might struggle to meet the demands of unexpected growth.
The first step to improving cash flow is to take a hard look at what you’ve already got. If you’re sitting on inventory that hasn’t turned over, then you’re essentially sitting on potential cash flow and it may be time for a sale on some of your overstock items. Alternatively, you might need to dispose of some older inventory that isn’t going anywhere so that you can report it as a loss on your taxes. It’s also possible that your inventory controls aren’t what they should be. You may have standing orders for inventory or supplies that are too high, producing a surplus. Once you’ve taken stock of what you have on hand, you can find ways to make it work for you.
Next, prioritize your liabilities. Some have higher interest rates, while others may be lower or even essentially interest-free. While you’ll want to pay off high-interest liabilities more quickly, those with little or no interest can actually improve your cash flow. This is why many business owners consider consolidating loans into a lower-interest account. Then end result is often a lower monthly payment.
One place where cash flow can back up is from slow-paying customers. If you’ve got unpaid customer invoices, then you’re essentially extending your customers an interest-free loan. In order to get positive cash flow moving again, you need to be able to turn your accounts receivable into capital, and one of the best ways to do that can be through receivables factoring.
With receivables factoring, you sell your unpaid customer invoices to a third party—such as QC Capital Solutions—and we forward a portion of the invoice to you right away, giving you the cash in hand when you need it. One of our clients used receivables factoring to help grow his small private security company. He received a contract to provide security for a large gated community, which required him to hire new guards and buy a new vehicle just for that property. With receivables factoring, he was able to meet payroll for the new guards and make installment payments on the new vehicle. What’s more, as he continued to factor his invoices and pay down the first vehicle early, he was able to buy his next two vehicles at more advantageous terms! Without factoring, this QC Capital client would not have been able to take advantage of this growth opportunity.
One of the benefits of invoice factoring is that it isn’t a loan, and so it doesn’t come with many of the hassles and long approval times of traditional financing. Instead, you get an advance on money that you’re already owed, and turn the burden of collecting on it over to the experts.