As a business owner, you want to take the next step and grow your company. For many small and mid-sized businesses, that means working on getting lucrative government contracts. Even if you’re lucky enough to get the work, actually doing it can be a real challenge, especially when it comes to things like invoicing and billing.
Government contracting can be complex and involved, and there can be a whole lot of rules you aren’t yet familiar with. Working with the government may be able to help you expand, but it may be a slower process than you think. It could also put some stress on your company’s finances in the short-term.
Keep reading to learn more about the benefits and pitfalls of government contracting, and how you can avoid the potholes on the path to success.
Long Payment Terms
When you work with an average consumer or client, chances are they’re going to pay your invoice relatively quickly. They might need to get approval from a boss or have a check signed, but for the most part, you can expect to get paid within 30 days of the time you finish the work. That means you don’t have to float money to workers and subcontractors for very long before you get that cash back.
When you take on government contracting though, money often has to be allocated and spending approved by multiple people. You might even have several agencies signing a check for work that was obviously approved and ordered months ago. What does that mean for you?
It means that you may be working without the money that you’re owed for considerably longer than 30 days. While government jobs can be rewarding financially, it isn’t strange for government agencies to take 60 or 90 days to issue a check. That’s all money that you’ll have to float to your own people before you get paid for a completed job.
Can your company sustain that kind of wait? Remember, the bigger the job, the more money you’ll have to pay out on your own before you get that check.
Consider Invoice Factoring
Cash flow is a major issue for many businesses. If you’ve just completed a government job and you’re waiting on a big check, it can be incredibly frustrating to find out that you don’t have enough in your account to pay all your bills.
Invoice factoring can be a major help for any businesses dealing with government contracting situations where payment may be less than immediate. After all, you need money to pay suppliers, employees and any subcontractors that worked with you on a large government project. You may not be able to get the same 90-day terms that a big government agency can get with you, either.
When you choose invoice factoring, you basically sell your invoices to a company at a small discount to receive the cash you need without the long wait. If you’re going to be doing business with a major government entity, you’ll likely need that cash before they want to pay.
Government contracting can be very lucrative, but you can’t let the long lead times break you. Find a qualified factoring company to work with and use the money you’re owed to grow your business and pay everyone you need to pay in a timely fashion.
Contact Bay View Funding to learn more about how invoice factoring can help any business with government contracting and cash flow issues. We’ve helped many businesses before, and we look forward to working with you too.