Monthly Archives: August 2019

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Understand Accounts Payable, Accounts Receivable, and Liabilities

In order to run a successful business, a lot has to happen on the back end. Accounting, which is usually performed by the business owner in the beginning, is the place where revenue and expenses meet, and hopefully result in a positive number. While business accounting can become very complex, do-it-yourself business owners can make things easier by understanding the differences between accounts payable, accounts receivable, and liabilities.

Accounts Payable

Accounts payable are fairly simple. They consist mostly of bills to your business that you need to pay. Typical accounts payable include invoices from suppliers, payroll expenses, lease payments on the office or facilities, company lines of credit, and other short-term debt and overhead costs. Think of accounts payable as an inbox, of sorts. Your goal as a business owner is to keep that inbox empty by paying off any amounts due to other people or businesses.

Accounts Receivable

For many business owners, accounts receivable is the enjoyable part of accounting. In short, accounts receivable is the money owed to your business from sales, consultations, and other services. Within accounts receivable, there is money that has been received from customers, and outstanding balances that have yet to be settled. Since most invoices are issued with a window of at least 30 days, revenue is often staggered. If a client’s account goes unsettled for longer than the schedule on the invoice, your business may have to perform a collection to get the money you are owed from the sale.

Liabilities

Liabilities are similar to accounts payable, with the exception that liabilities include both short and long-term debts, as well as obligations to outside parties. Bills, loan payments, expenses, services and products that have yet to be delivered, and more fall under liabilities. Future pay-outs on legal matters, warranties, insurance, and more are also considered liabilities.

By looking at your organization’s accounts payable, total liabilities and accounts receivable, you can get a clear picture of your cash flow. One of the best ways to improve your cash flow is through factoring services, which quickly convert outstanding customer invoices to cash, so your business has ample capital to cover your liabilities, and plan for growth projects.

At New Century Financial, we help businesses achieve an improved cash flow with our factoring services. If you need a boost in cash flow, or are tired of the lag in customer payments, contact the experts at New Century Financial today.

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Staggered Receivables Vs. Cash Flow: Resolving the Equation

Cash flow is important to every business, as the revenue covers overhead costs and provides a source of capital which can be used for growth projects. But with receivables on staggered payment schedules, many businesses are not getting access to revenue as quickly as they should. Fortunately, there is a way to bridge the gap between staggered receivables and cash flow.

Staggered Receivables and Cash Flow Strains

Issuing invoices with staggered payment schedules of 30, 60, or even 90 days is a standard practice. However, during that time, businesses need to make payroll, purchase supplies, advertise, and cover the cost of additional orders from other customers. Staggered receivables can end up placing a severe strain on cash flow, often pushing business owners to take out short-term loans to cover gaps in capital. These short-term loans place a further strain on cash flow, because a good portion of the revenue trickling in now has to go towards paying off debt, in addition to the usual expenses.

Closing the Gap

To remove the need for short-term loans and to speed up the rate of revenue after invoices are issues, businesses use accounts receivable factoring. Factoring allows businesses to convert receivables to cash within 24 hours without placing debt on the books. Businesses gain more control over cash flow with accounts receivable factoring, because they can decide which invoices or parts of invoices are factored. Factoring makes the cash flow strains of staggered receivables a thing of the past while propelling businesses toward faster growth and building capital reserves.

Get the Right Factoring Services for Your Business

New Century Financial specializes in accounts receivable factoring. Our services have no contracts, no hidden fees, and no minimums. Our team will work with you to analyze your cash flow and outstanding receivables, and create a factoring strategy to smooth out revenue cycles, build up working capital, and position your business for growth. We provide factoring services to a wide range of industries throughout the United States. Contact New Century Financial today and resolve the gap between receivables and cash flow once and for all.

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How the Debt Cycle Limits Growth for Small Businesses

When businesses need funding, the conventional solution is to take out loans for working capital. This sets the debt cycle into motion, and many businesses find themselves dependent on loans for the duration. However, the debt cycle can place a big strain on finances and limit business growth.

What Is the Debt Cycle

When a business takes out a loan, the capital is given in exchange for debt. The business then makes payments on the loan, plus interest, to pay off the debt. Loan debt takes a good chunk out of monthly revenue, and payments must be made regardless of how many or how few sales are made in that time. If cash flow is strained, businesses may take out additional short-term loans to smooth out revenue cycles at the risk of placing even more debt on the books, and juggling various loans at different interest rates can place a business in the fast-lane towards bankruptcy.

Business Growth and the Debt Cycle

When businesses try to position themselves for growth, they also take out loans to cover the cost of expansion and increased production. The debt that comes with loans for growth capital increases the risk for business owners and limits the potential for expansion. As a business expands, the revenue must exceed the new overhead costs as well as the debt from loans in order to be successful. To compromise, many businesses scale back on growth projects so debt and overhead costs are more manageable. Even still, increased sales do not guarantee faster revenue, especially if invoices are issued on staggered payment schedules of 30 days or longer.

Breaking Free of the Debt Cycle

To maintain a healthy cash flow, build up capital reserves, and reduce or eliminate the need for debt-based financing, businesses use accounts receivable factoring. Instead of waiting a month or longer to receive payments from clients, accounts receivable factoring immediately converts unpaid invoices to cash, which allow for rapid and successful growth without the limitations of debt-based loans. No debt, fast revenue, and minimized risk that gives businesses an advantage over the competition.

At New Century Financial, we provide accounts receivable factoring services that can be tailored to fit your needs and help you reach your goals. Contact our offices today to get started.

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Business Finances: An Overview for New Entrepreneurs

New business owners often wear many hats at once, acting as their own sales, marketing, administrative, and accounting departments. Unless they’ve had prior experience as a CPA, most business owners will agree that accounting and managing finances can cause the most headaches and take up the most time. Fortunately, there are some easy tips to make managing business finances easier so you can streamline the accounting process and focus more on getting sales and growing your operation.

Keep Business Finances and Personal Expenses Separate

On the outset, this rule seems fairly obvious. As time goes on though, the lines can get blurred. Using personal savings to fund your business shouldn’t happen, but some start-ups do use personal money to launch and maintain operations. Additionally, some business owners make purchases such as office supplies, and purchase an item or two for personal use in the process. It is imperative that you keep business finances and personal expenses separate. Not only will this help to simplify accounting, but when you need to justify tax deductions with receipts, tracking business versus personal expenses becomes much easier to track.

Working Capital and Cash Flow

Working capital is what allows you to maintain and grow your business. Working capital can come from business lines of credit, revenue, or other sources of funding. Cash flow, on the other hand, and seem like a constant tug of war. Ideally, business finances are constantly improving due to a regular influx of revenue from sales. However, since most invoices are issued with payment schedules of 30 to 90 days, many small businesses experience staggered revenue with expenses outweighing income. Maintaining a healthy cash flow can create stable business finances to achieve fast growth without relying on loans.

Staying on Top of Customer Invoices

Waiting on payments from customers and tracking unsettled accounts can eat up a lot of time and resources. Your business depends on receivables, and waiting a month or longer to receive payments can place a big strain on business finances. To speed things up and boost cash flow, many small businesses use accounts receivable factoring. Factoring turns unpaid invoices into cash within 24 hours, so you can maintain a positive cash flow, build up working capital, and make the accounting process much easier.

At New Century Financial, we provide the most comprehensive factoring services nationwide. Contact our offices today and get the factoring solutions you need so you can focus on building and growing your small business.