Reverse factoring is a process you’re definitely familiar with, if you have been looking at ways to improve cash flow for your company. Let’s look back at what it actually is. Also known as supply chain financing, reverse factoring is a financial product/service when your company sells its accounts receivable to a 3rd party, for a fixed fee in exchange for quick payment. It’s a service that has many great benefits. Let’s look at five benefits/pros for reverse factoring!
Reverse factoring gives you a stable financial foundation
Instead of having to wait around until the very last moment in the deadline, you can always rely on funding to come through very quickly. Even after the deduction of the factoring fee, this service, the quickly made wire transfers are an amazing luxury for both small, medium and large enterprises. In business, time is money and you can’t afford to lose time by waiting around!
Reduced workload for accounting and finance staff
If you sign a reverse factoring contract, the job of your accountants, finance officials and administrative staff (or whoever is responsible for registering payments) becomes so much easier. If you’re also able to implement state-of-the-art computerised solutions, like factoring software, tracking data, managing every transaction and overseeing related processes is faster, smoother and creates much less challenges than if you were to proceed without it. At the same time, you can dedicate these staff members to the areas and process trees which really need more attentiveness. Instead of leaving them to chase unpaid accounts, allow them to wholly contribute. By implementing tools like Soft4Factoring, you can simplify day-to-day duties of your management staff and do more in less time!
Better and more stable business relationships
For the most part, a lot of businesses will opt for factoring not just to boost their own cash flow, but to also develop stronger partnership with their suppliers. This is also a part of the reason why reverse factoring may also be referred to as supply chain financing in some cases. With the money coming in at a much more rapid pace, you can afford to pay in advance and make reassuring deals to avoid disruptions in your supply chain for the foreseeable future. This also helps your suppliers prioritize you as a client!
Much less disputes
Pretty much every organisation and business has run in to clients which have failed to pay in full, on time. It can happen for a variety of reasons but there are some occasions when clients will purposely delay until the very last moment, until making the payment. Such unfortunate situations require attentive monitoring from dedicated staff. By using reverse factoring, you automatically evade such time-wasting disputes and financial instability.
Better cash-flow management and flexibility in cash allocation
Improved flow of cash is the No.1 reason why businesses use factoring. By no longer having to wait weeks or months until the payment finally comes through, businesses with supply chain financing contracts can plan ahead and have much more flexibility for investments. Sufficient cash reserves are inseparable from a company that’s financially healthy.