5 Ways to Improve Working Capital


By Bibby Financial Services

27 Mar 2018

Many business owners find that obtaining the working capital they need is the biggest hurdle they face in operating their businesses. Acquiring the funding needed for all the different situations an entrepreneur may encounter isn’t easy. Here are the top 5 ways businesses can improve working capital and how cash flow management techniques like using an alternative lender, factoring and invoice discounting can help:

Check the Payment Discipline of Your New Clients

If the big order you received from a new client doesn’t get paid as quickly as you expected, your cash flow could suffer, but you might also be reluctant to push them too much or too hastily. By using invoice discounting, you take away the stress of on-time payments, as the alternative lender advances you on the agreed upon invoice value* while also handling the responsibility of collecting payment.

Get Accounting, Billing and Collections Support

Accounting and collections are very low on the list of priorities for most business owners. Many consider them ‘necessary evils’ but there is a direct relationship between being on top of accounts receivable and getting paid. Alternative lenders like Bibby Financial Services (BFS), provide back office support through full accounts receivable management for our factoring services to help business owners with their billing and following up for prompt payment. BFS provides real-time online access to all status reports via an account management system so that you can focus more on growing the business.

Take Time to Forecast Your Future

When you are busy offering great services to your customers, your business’ products, planning and forecasting of the financials can inadvertently take a backseat. Being busy is not always the same as doing well financially. Make it a habit to plan your funding needs. Working with an alternative lender will help you forge a relationship with an adviser to that can plan with you and offer solutions even in your business’ most unpredictable moments.

Partner with a Financial Service that Monitors Your Concentration with One Customer

Having one (very) big customer can give a false sense of security. It may seem like a stable and effective way to manage your business but what would happen if that customer were to slow or even stop paying you or leave altogether? When utilizing factoring or invoice discounting for financing, your funder can alert you to changes in your customer’s repayment behavior and how much of your total revenue comes from that key client. These insights can trigger you to decide when it’s time to go out and find more clients to support your business.

Maintain Enough Cash in Reserve

When the books finally balance and you see a profit, it’s tempting to want to use that money immediately and put it right back into the business for improvements or to increase production/inventory. Ask yourself one question to determine if you are ready, do I have enough cash reserves to sustain my business for 3-6 months of operating expenses? If you can’t confidently answer that question or feel uneasy about tying up that much cash, look at invoice discounting or factoring your receivables to increase your business’ working capital without tapping into your cash reserves. With factoring, you can expect to receive an advance of up to 90%* of the invoice value upfront, so you’ll have access to invest those funds immediately back into your business while keeping your cash reserves or safety net intact.

*Advance rates are higher for certain industries. After your customer pays, you receive the remainder of the invoice value minus fees, which are competitive with interest rates from other financial products.

Invoice discounting financing gives you the ability to maximize cash flow and stop cash from leaving the business. To learn more about working with an alternative lender and the solutions one can offer, contact BFS today at (833) 502-4229 or get a quote so one of our business finance experts can help you directly.

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