Slow paying clients can be a major problem for companies; consuming time, resources and jeopardizing the financial stability of many small and medium sized businesses. Like it or not, the current recession and slow recovery have forced many businesses to live from invoice to invoice. A late payment can have a negative effect, forcing the company to delay payroll or critical supplier payments.

The best way to handle a slow paying client is to prevent the situation from happening in the first place. It’s a lot more effective to spend your resources ensuring clients pay on time, rather than chasing slow payers. This can be accomplished fairly easily.

There are two things you need to do to make sure commercial clients pay one time. First, you need to check their commercial credit rating / payment history – and only give credit terms to those that have an acceptable credit report. This can be done by using one of the many business credit bureaus that exist. Most reports are relatively inexpensive. Second, you need to have a good invoicing and follow up procedure in place. This will take some work but will have a substantial payoff. Be sure to send invoices to clients in a timely fashion and be sure to verify that they received the invoice.

If your clients won’t pay their invoices sooner, your second option is to finance your invoices using invoice factoring. The factoring financing advance can be used to cover your business expenses, while you wait for your clients to pay. The transaction with the factoring company is settled once your client pays the invoice in full.

Factoring has two advantages. First, it can improve your finances, especially when combined with a good invoice management program. Second, and perhaps more importantly, it gives you control of your cash flow, eliminating the guesswork of when clients will pay. This enables business owners to spend more time running their business and less time chasing invoices.

Qualifying for factoring is relatively easy. You need to have clients with a good commercial credit rating and good invoicing practices. Additionally, your company has to be free of encumbrances.

Most machine shops tend to be very cash flow intensive companies. They have to handle purchase orders, pay suppliers, handle payroll and collect from clients. All these events have to happen with the right timing for the business to be successful. And usually, timing is very tight. And unless the company is well funded, this means that the company is very sensitive to late client payments. For example, a client delay in a payment can trigger a chain reaction of events that leads to missing supplier payments or delaying payroll.

This problem can easily be solved with business financing. Unfortunately, getting financing in the current economic environment is very difficult. Few institutions are willing to provide business loans or lines of credit to companies that can’t provide sufficient and substantial secondary collateral. Aside from having substantial assets, companies need to show impeccable financial statements, a strong management team and a solid business plan. Few small or midsized machine shops can meet these requirements – putting a business loan out of the reach of most.

A second alternative is to ensure that client payments are always on time, or ahead of schedule. While coaxing clients to pay quickly can be difficult, you can accomplish a similar result by financing your invoices with using factoring financing. Invoice factoring provides you an advance on your invoices, providing the funding you need to meet expenses and complete projects. The transaction is settled once your client actually pays the invoice.

Since factoring provides a predictable and accelerated payment stream, your company is usually in a better position to take on new clients and projects. When used correctly, accounts receivable factoring can help a company grow.

In general, factoring is much easier to obtain than a business loan. To qualify for it, your clients must be credit worthy companies, and your business must be free of liens and encumbrances. Thanks to the current difficulties in getting conventional funding, invoice factoring has been gaining traction in becoming a mainstream source of funding.

The field of Information technology (IT) is full of small and medium sized companies that are vying for customers and for position. Surviving in this cutthroat industry requires that owners manage their businesses, especially their cash flow, very carefully.

The IT industry is known for having heavy expenses. Payrolls tend to be high since technical employees command high wages. Also, if the company also resells hardware, if not unusual for equipment and inventory expenses to grow quickly, especially if the firm is involved in large projects.

On the revenue side, clients usually pay their invoices in 30 to 60 days. Because of this, the firm must usually cover its overhead and other expenses for a time before being able to recoup their investment. Waiting to be paid can be a challenge for many small or medium sized IT firms. Furthermore, few small firms have enough capital to handle payment delays. That means that the firm could be at risk of missing supplier or employee payments, if a few clients delay their invoice payments.

If the company has funds in the bank, a few late invoices will not affect things at all. However, if the firm is running lean, there are only three things you can do. You can delay your supplier payments until you get paid, you can try and arrange for quicker payment or you can get business financing.

Negotiating payment schedules with clients and suppliers can be tricky and seldom produces predictable results. Most small and medium sized firms will probably be better of getting formal financing. One emerging financing solution called factoring is ideal for this type of situation. Invoice factoring eliminates having to wait for your clients to pay by providing you with a funding advance on your invoices. You get stable and predictable cash flow, which enables you to focus on running your company, rather than on collecting invoices. The transaction is settled with the factoring company once your client pays the invoice.

Invoice factoring is relatively easy to qualify for and available to small and medium sized businesses. The biggest requirements to qualify are that your clients must have good commercial credit scores and your business must be free of encumbrances.

Factoring can be a great solution for small and midsized IT companies that can’t afford to wait 30 to 60 days to get paid by their clients.

The pallet manufacturing and distribution industry is very competitive. Whether you are manufacturing pallets, distributing them or both – managing income and expenses can be very challenging. You have to work with suppliers that demand quick or immediate payments. At the same time, your clients want to pay invoices in 30 to 60 days. Pallet manufacturing and distribution companies that cannot manage their income and expenses soon find themselves with cash flow problems.

Problems usually start when a client starts taking a little longer to pay their invoices, forcing you to dip into capital or to delay payments to your owns suppliers. If left unchecked, this situation can snowball into a major problem that threatens your company.

There are a few ways to manage this problem. One alternative is to try and negotiate delayed payments to your suppliers while trying to obtain quicker payments from your clients. Although worth a try, this type of juggling seldom works for the long term. A second alternative is to get business financing from an institution.

This can be a good alternative for larger companies who can show substantial assets and provide solid financial statements. Although qualifying for a business loan is not easy – business loans are usually available to well managed larger firms. But what can small or midsized firms do?

A better alternative may be to use factoring financing. Invoice factoring solves the dilemma of slow paying clients by providing an advance against their invoices. This quick payment provides the firm with the funds they need to meet expenses and grow the business.

Factoring has a number of benefits. It provides the company with stable and predictable cash flow, which smooths operations and planning. Furthermore, accounts receivable factoring (as it’s commonly called) is fairly easy to obtain. The biggest requirement is that the invoices you finance have to be from credit worthy commercial clients. Additionally, your company needs to be free from legal or tax problems or encumbrances.

Qualifying for factoring is relatively easy which makes it an ideal solution for small and medium sized clients whose biggest problem is that they cannot afford to wait to get paid by clients.