Bay View Funding Blog

How can I fulfill my large orders when cash flow is tight?

The dilemma for many manufacturers is the lack of available cash flow to buy raw materials in order to complete large orders. It is also an issue for distributors or wholesalers lacking funds to pay manufacturers to produce goods.

Lack of available funds can mean losing valuable business you know you are capable of completing. It could also seriously jeopardize future orders with existing customers. Purchase order funding and invoice factoring can both be alternative financing options worth considering.

So what is the difference?

Do you ever offer terms to your customers without checking their commercial credit rating first?

The credit of any business can easily be checked, and it should be your company policy to make sure this happens with every customer. The credit rating a company is given takes into consideration the likelihood it will meet its financial obligations. In other words, whether or not you will receive payment on your accounts receivable in a timely manner. Obviously, if their credit rating is bad, you may want to question whether it is worth doing business with them at all.

You are set up with a factoring company; you have been successfully receiving funding on your working capital, and were not expecting any difficulties. Your funding has been delayed - what happened?

Our 3 common invoice factoring issues will explain why sometimes things don’t proceed according to plan, and how you can help prevent these issues from arising. These vital pointers will affect your ability to receive funding from your factor, so it is worth bearing all of these situations in mind.

•  The invoice is sent, but the work has not been completed

A question often asked of invoice factoring companies is will you contact our customers?

The answer is, of course, a resounding ‘yes’. This leads to the importance of searching for a factoring company who understands the business, and is able to interface with your customers at the highest level in a courteous and knowledgeable manner. Let’s examine why the interaction with your customers is necessary.

Are you an oilfield goods or services contractor looking for faster payment on your accounts receivables?  A specialist-factoring company, who understands the issues of your specific industry, can help to find an answer.

There is a buzz about factoring companies who specialize in certain industries. Invoice financing companies who offer industry solutions do so because they understand the process and have experience in specialist fields.

If you supply products or services to the oil and gas industry you will already know some of the issues you face when it comes to invoice collection. Similar to the government space, oil and gas customers are generally extremely reliable about payment, and have excellent commercial credit, but often require that their suppliers extend their invoice payment terms to 30 days at the minimum, but up to 60 or even 90 days.

If you think omitting information on your invoice factoring application will go unnoticed, think again!

While factoring receivables is a great answer for many companies who are thriving, more often than not a search for accounts receivable financing is driven by a cash flow crisis. 

It may be that you have some outstanding substantial invoices but you are in a cash flow meltdown, in which case factoring may be a perfect fit for your company. In this instance, even if you have a few issues to contend with, a factor will more than likely be able to help. However, it is always worth adopting cash flow best practices to try and avoid getting to the sink or swim period of accounts receivable collection.

The speed with which your company is initially funded is in part down to you.

You frequently hear about how easy it is to factor your invoices, and it certainly can be, but promptly providing the correct information requested from your factor helps the process run smoothly and quickly. 

So you are seriously considering invoice factoring, and of course you want to be funded as quickly as possible. As we have mentioned before, an experienced factoring company wants the same for you, but will not compromise standards to push funds through quickly, which really works in your favor in the long run. Invoice factoring should never be considered a last minute answer!