While offering payment plans or extended credit terms to your clients is a great way to draw in business, slow-paying clients can bring your company to a standstill if not handled carefully. What’s the best way to handle this type of client? Keep reading to learn more from the financial experts at Eagle Business Credit.
Slow-paying Client Strategies
When it comes to slow-paying clients, there are several options to choose from. You can avoid slow-paying clients by weeding them out before you agree to any terms for services or products. To do this you need to fine tune your negotiations skills and listen to how your potential client reacts to your payment terms. While you should always use caution when dealing with clients who are notorious for slow-payments, avoidance isn’t always an option, especially for new businesses and those that deal with big companies and certain industry sectors like retailers. Another tactic is to strengthen your revenue cycle management skills. This involves forecasting your revenues and expenses well in advance, then scheduling payment plans that’ll keep the cash flow steady throughout the year. The third and easiest option for handling slow-paying clients is to enlist the help of a factoring company who will advance funds on receipt of your invoices so you don’t have to wait to get paid.
How Factoring Works
Factoring is the process of buying a business’ invoices or accounts receivable in exchange for immediate cash funds. When you enlist the help of a factoring firm, they’ll analyze your accounts and know the likelihood of whether they’ll be able to collect on those accounts. A discount is applied to the accounts being purchased, but this amount is usually very reasonable in comparison to the amount of money you could lose if a client defaults on a payment plus the cost of managing your accounts receivable in the first place. Factoring is a great way to get the funds you need fast. It also removes the burden and hassle of pursuing late-paying clients, allowing you more time to focus on running your operation.
How to Find Factoring Companies
A casual online search will likely yield a multitude of factoring companies, both local and national. How do you find the best one for your business needs? Speak to people at the factoring company. Do they appear to be credible and knowledgeable? Do they understand your needs and are they offering a workable solution for you? Are they the actual lender or just a broker who will receive a commission from the real factor? Check out reviews on websites like the Better Business Bureau. The Better Business Bureau grades factoring firms according to customer satisfaction scores. As with any professional financial service, always verify the business’ operating license. This’ll help protect you from scam artists posing as factoring companies in Douglasville, GA.