Large companies usually pay their invoices in 30 to 45 days. It’s a standard practice in which few companies make any exceptions. Lately, due to the past recession, companies have started lengthening their payment times. Many now pay their invoices in 60 or even 80 days. This has caused a number of problems to small business owners who depend on timely payments to be able to run their companies.

Why do many large companies take so long to pay their invoices? On the administrative side, paying an invoice usually requires that paperwork be reviewed by several people and that deliveries be checked. Furthermore, most invoice payments need to be approved by several layers of management. given all the moving parts, the process of getting all the proper paperwork and signatures can actually take a couple of weeks. However, there is another reason why companies take so long to pay invoices.

One of the main advantages of paying invoices in 30 to 60 (or more) days is that the company gets to use your product for free for a couple of months. One could argue that it’s the equivalent of getting an loan from you – the supplier. Delaying payments basically gives your client use of the cash that otherwise would have been used to pay you. From this perspective, it’s obvious why they chose to pay invoices in 30, 60 or even 90 days. This strengthens their cash flow.

But what can you do if you need the money sooner? Asking for a quick payment seldom helps, although sometimes you can get companies to pay you in about 10 days if you offer them a 2% discount. This is seldom reliable though. Another alternative is to use business financing. Although business loans can be used to solve cash flow problems, a better solution may be to use invoice factoring. Actually, invoice factoring is specifically designed to solve the problem from slow (but solid) paying customers. It advances funds on your slow paying invoices, providing the funds you need to cover operations. The transaction with the factoring company is settled once the client pays the invoice in full. Most factoring companies will advance funds based on the credit quality of your clients, provided your invoices are free of liens, judgments and other potential encumbrances.

Factoring can be an effective solution for companies that have good potential but cannot afford to wait for their clients to pay.

Having customers that pay their invoices on time is critical to the success of any business. Late paying customers affect your cash flow and therefore your ability to meet your own obligations. In most commercial transactions customers pay their invoices in 30 to 60 days. This is commonly known as offering terms.

Offering terms to a customer is no something that can be taken lightly. Many business owners like to congratulate themselves when they close a big sale and send the invoice to the client. Careful owners save the congratulations until after they get paid. But how do you make sure that customers pay you on time?

There are a number of things that you can do to make sure clients pay one time. Apart from delivering good and timely services, the most important thing you can do is check their commercial credit rating. This will tell you whether they have paid their past suppliers in time. Although not a perfect indicator, it’s useful to know. For example, if a potential client has a track record of paying all their invoices 90 days past due, what are the chances they will pay yours on time?

It’s usually a smart strategy to check a clients commercial credit before making the actual sale. One additional thing you can do to help customers pay on time is call them soon after delivery to verify that they are happy with the work/product. Lastly, always verify that they have the proper paperwork (invoices/etc) to process your payment. Many payments are delayed simply because vendors forget to submit the proper paperwork .

Sometimes, clients simply pay slowly and there is not much that you can do about it. This can wreak havoc on your cash flow and threaten the stability of the business. If this happens, you should consider invoice financing.

Invoice financing is an innovative form of business financing that provides an advance payment using your invoices as collateral. Invoice financing is a convenient alternative to business loans that offers substantial flexibility. Although not a cure all, invoice financing can help companies whose biggest problem is that they can’t afford to wait for their clients to pay.

Most growing companies run into cash flow problems at one time or another. The recent recession has made this problem all too common, forcing managers to find strategies to cope with these problems. Many cash flow problems are caused by customers delaying their invoice payments. In the recent past, most commercial customers paid their invoices in 30 to 45 days. As conditions deteriorated, they started paying at slower rates, sometimes taking up to 70 days to pay.

Slowing payments can have serious repercussions for the business. At first, you can counter their effects by paying your own suppliers at a slower rate. If left unchecked, it may jeopardize your ability to meet critical payments – like payroll. One you are at risk of missing payroll the business is in grave danger.

One way to deal with this problems is to build a cash reserve. This is easier said than done as few small companies have the resources to build a reserve. Another alternative is to use business financing to cover the gap.

Using a business loan to cover expenses while waiting to get paid by clients can work if used properly. Most business loans are designed to buy goods and are paid on an amortized schedule. This makes them cumbersome to use if you are only interested in covering expenses while waiting to get paid. A better solution would be a revolving line of credit. The problem is that all these solutions are subject to strict banking underwriting standards, and are a viable option for companies with substantial assets.

There is a better alternative though. It’s designed specifically to solve the cash flow problems generated by slow paying clients. The solution is called invoice factoring. An invoice factoring program will give you a funds advance on your slow paying invoice. This enables you to cover business expenses while waiting for your clients to pay. Once your client pays, the transaction is settled by the factoring company.

As opposed to most conventional business financing products, invoice factoring is relatively easy to qualify for. You need to have invoices from credit worthy clients that are free of encumbrances and liens. This makes it an ideal solution for small companies whose biggest assets is a list of solid clients.

Corporate cash flow nightmares are more common than most people think. Thanks to the current uncertainty about the economy, many companies have started delaying payments to their suppliers. They still pay, but they pay later. Two years ago, invoices usually got paid in 30 to 45 days. Now they may take 60 or even 70 days to pay. Large customers delay payments for one single reason – it helps their own cash flow. They get to use the cash, that was destined to pay your invoices, for 15 or 30 more days. Think of it as an interest free short term loan that you make to them.

Having clients that pay beyond terms can create a cash flow nightmare. Many business owners run their business very tightly, with little room for error. It only takes a few late payments to throw operations into a tail spin. When this happens, business owners compensate by starting to pay their own bills late. This can easily get out of hand and start affecting the ability to meet payroll. If you are at risk of missing payroll you know you have a nightmare in your hands.

Since making clients pay quickly is no usually an option, there are two possible solutions. One solution is to start building a reserve fund ahead of time. This ensures you will always have money to cover all expenses. But this comes at a cost because money in the reserve fund can’t be used in other parts of the business. And, few companies have the resources to build the fund.

A second alternative is to look for business financing. This will usually solve your problem, if you get the right type of financing at the right time. Unfortunately, asking for a business loan when you are in the middle of a cash flow disaster seldom works. Most financial institutions will only give business loans to companies that have solid financial records.

A better solution may be to use invoice factoring, which provides an advanced payment for your invoices. Factoring covers your customers payment gap and provides the liquidity you need to operate your business. Furthermore, most factoring companies are used to working with clients that have financial problems or are turning around their business, so few will be too concerned if your financial statements show some problems.

Factoring is a very specific solution, it helps bridge the gap between delivery of services and payment, and can help stabilize cash flow. It’s an ideal solution for companies whose biggest problem is slow paying clients.

Finding a way to finance your business in the current economic environment remains pretty difficult. Most institutions have tightened their business financing standards and will only offer business loans to large companies that have substantial assets and impeccable financials. Unfortunately, few small companies have been able to weather the recession without a substantial financial impact. And thanks to the recession, most small businesses don’t have impeccable financial statements – that’s why they need business financing. Fortunately, a business loan is not the only financing alternative.

Is your company having cash flow problems because customers are paying their invoices slowly? If this is the case, and If your customers have good commercial credit, you may be able to use invoice financing. Invoice financing bridges the gap between delivery of service and payment and helps companies with cash flow problems. This solutions provides predictable cash flow, enabling the company to meet expenses and capitalize opportunities.

There is one critical advantage of that differentiates invoice financing from other solutions. Your customers credit is much more important than your own company’s financial situation. This means that companies whose biggest asset is a solid list of customers can usually benefit from invoice financing.

Most invoice financing transactions are structured as invoice purchases – where the financing company buys the financial rights to your invoices and pays you immediately. They settle the transaction once your client pays the invoices in full. The key point is that the finance company buys the invoice, therefore they are very interested in the credit worthiness of your client. They consider that to be the strongest collateral for financing. And this allows you to leverage your clients financial strength to your advantage.

Having good paying clients is a key requirement to qualify for an invoice financing program. Additionally, your invoices need to be free of legal encumbrances such as liens or judgments. Generally, invoice financing works best for companies that are reasonably free of problems. However, it can also be used in turnaround situations where funding is needed to restructure operations.

Finding business financing for a company has always been a challenge. to complicate matters, the current economic environment has made it a nearly impossible task to find investors. Nowadays, investors are looking for safe investments, and unfortunately, small and medium sized companies are not considered safe investments.

Although investor financing has many benefits, you should also consider alternatives that don’t require that you give up ownership in the company. One common way to finance a company is to use a business loan. Although business loans are well known, they can be difficult to get because they have to go through a strict underwriting process. To qualify for a business loan, most companies need impeccable financial statements, solid assets and a few years of positive operating experience.

One alternative to business loans is factoring financing. This solution specifically helps companies with cash flow problems that arise from slow paying clients. It provides a cash advance against slow paying invoices, enabling your business to cover operating expenses. By reducing the number of days it takes you to get paid, invoice factoring can help free cash flow that can be deployed to new projects and growth opportunities.

One of the advantages of invoice factoring is that it is reasonably easy to obtain. Most factoring companies structure the transaction as a purchase, meaning they buy the invoice from you. Since they are buying the invoice, their biggest concern is the credit quality of your clients. This means that small companies or medium sized companies with a short track record but very solid clients can usually qualify.

Factoring companies buy invoices in two payments. The first payment covers about 80% of the face value of the invoice. Your company gets this very quickly. The second payment covers the remaining 20% of the invoice, less the factors fee. This payment is usually provided shortly after your client pays the invoice in full.

Invoice factoring is a flexible financing solution that can help small and medium sized companies that have cash flow problems.