Invoice factoring is simple. You sell your invoices to a factoring company for a small fee, and in return, you are provided with immediate cash for the services or products you have sold.
Many businesses turn to factoring when they realize their working capital (or lack thereof) is holding the company back. They need more immediate payments for their work so they can continue to pay the bills, pay their employers, and purchase their inventory.
It’s surprising, then, when factoring invoices begins to provide even more working capital than the company had hoped for. What should a company do with the additional revenue? Here are just a few smart steps your company should take after working with a factoring company.
Invoice factoring is an incredible solution for improving cash flow, but it shouldn’t be taken for granted. Before you make any decisions on how to spend your spare change, take some time to study the success of your company thus far, and try to determine where you would like to see your company go from there.
Reviewing Your Stats
Pull all of your company’s past financial statistics for review. Where has the majority of your money been going? Where is the majority of your income coming from? How would you like to see these things change in your future? Extra cash should be spent in ways that increases revenue. Whether you choose to spend it on repairs or talent, an in-depth review of your finances should allow you to make a confident decision on how to spend your newly found capital.
(Through review, you may learn that you are either overcharging or undercharging on your goods and services. Porter Capital has tips for repricing!)
Save, Save, Save
If you have taken time to assess your needs and review your statistics, you may come to find that (with invoice factoring) your business is doing just fine for itself. If that is the case – great!
Instead of investing your cash flow into furthering your business, it may be wise to see where the business goes on its own. Try saving your money during these good years. The economy is not predictable or steady. Your business may not need the extra money right now, but who knows what could happen down the line. Save some of your money for later – chances are, you will be glad you did!
Learn some of the top ways to spend your extra working capital with Porter Capital.