A lot of small businesses fail because of cash flow issues. While credit cards and bank loans can be used while waiting for invoice payments, business owners will want debt-free options which do not take away their gains. For companies that have funding problems, invoice factoring is proven to be a viable option. However, it is important for business owners to avoid making certain mistakes to get the most out of this funding option. These mistakes include the following:
Failing to Give Accurate Information
When applying for an invoice factoring, make sure you provide the right pieces of information to the factoring company. Such information should include the kind of business you operate, your expenses and revenues as well as client information. Giving inaccurate information can lead to outright rejection of your application.
Failing to Provide the Required Documentations
Factoring companies may require certain documents to determine both your identification and your clients. Also, they will ask you to provide supporting documents for your invoices. To make sure you can submit those papers on time and to the right party, consider using financial software that makes data exporting faster than when you do it manually.
Failing to Understand the Factoring Contract’s Terms
After signing the factoring agreement with your chosen company, there are things you should do. For instance, you must make sure your clients send their payments to the factoring company. Make sure you discuss your other obligations in the transaction with your service representative to have a full understanding of the terms.
Failing to Understand the Fee Structure of the Factoring Company
Because money is involved in a factoring transaction, make sure you take caution on hidden fees which cover business costs such as collateral, software and money transfer. Don’t hesitate to ask the factoring company if they charge a flat fee or a percentage of your invoice’s total value. If certain fees are involved, try to negotiate with the company.
Factoring Invoices for Services Not Yet Delivered
Factoring companies buy invoices for services and products that have been delivered. They will verify your invoices before they provide you funds. Thus, to start building trust with these companies, make sure you submit invoices for delivered products or services only.
To make sure your application gets approved and you maximize the benefits of invoice factoring, work with a reputable company. Interstate capital, as a factoring company, funds small businesses which have cash flow solutions.