Almost all the businesses in the world don’t think about factoring their account receivable. This is because factoring isn’t acceptable for most type of businesses. However, there is 1 industry that never fails that have been using it together with their manner towards to success. This specific industry is the trucking business. In fact, they have used them for decades now and they had not obtained any severe negative effects from it.
What is factoring
First off, let us discuss what factoring is. In bookkeeping, factoring is every time a factor, buys business accounts receivables and provides them with the advanced payment based on how much the business account’s unpaid invoices. The third party firm then starts to collect the owed receivables. This type of method allows businesses to keep their cash flow.
Here are a few of the advantages of factoring.
• Time efficient — it’s a great time saver since the payments are complete beforehand. The saved time will then be employed to more important things like sales and marketing.
• Good for business improvements — because there’s an improvement in payment, you may use the instant cash for developments and advantages of the company. Implementing new employees that may generate a lot larger income to the business. Or maybe purchasing advertisements to help boost the companies’ sales and promotion.
• No security — this method doesn’t require that you get collateral in case anything goes wrong.
• More capital — factoring usually allows a business to receive almost 80% of the total receivables. This much fund transfer does not ordinarily occur when applying for loans.
Why use factoring services
Moreover, the main reason trucking companies in usa frequently choose factoring over other methods of cash maintenance is that it prevents any future collection issues and does not signify any bad debt.
The first payment of Leasing services provides enough cash flow within the enterprise to warrant their total expenses including the factoring services.