Monthly Archives: March 2021

Achieving a Better Sales to Revenue Ratio

Businesses across all industries are balancing sales and revenue to optimize cash flow. However, the sales to revenue ratio can get skewed when payment windows are staggered by a month or longer. Fortunately, there is a solution that can rightsize cash flow and bring the sales to revenue ratio back into focus.

Understanding the Sales to Revenue Ratio

When you purchase something from a retail store or a restaurant, goods are paid for and the business received revenue immediately at the cash register. For other businesses, such as manufacturers, suppliers, maintenance companies, law offices, and more, invoices are issued after a sale is made. Those invoices have staggered payment windows of 30, 60, or 90 days. This means that customers have a month or longer in which to pay for the goods or services they purchased, all while businesses are spending money to cover overhead, payroll, and the costs associated with other customer orders. In other words, a business could have sales through the roof and still find themselves struggling to keep operations running while they wait for payment from customers.

Improving the Ratio

Issuing invoices with staggered payment windows of a month or longer is a standard business practice, and probably will not change anytime soon, even though the rate at which we do business gets faster every day. Yet there is a way businesses can turn their unpaid customer invoices into cash to improve their sales to revenue ratio. Instead of waiting 30, 60, or 90 days, businesses that factor their unpaid invoices get access to capital within 24 hours. This results in a nearly perfect sales to revenue ratio that allows businesses to boost cash flow, cover costs, and build up reserves for growth. Additionally, factoring is not a debt-based solution, which makes it a much friendlier solution than resorting to short-term loans to smooth out uneven cash flow issues.

At New Century Financial, we provide comprehensive factoring services to businesses across all industries, with no upper limits and no long-term contracts. Achieve a better sales to revenue ratio today by contacting the experts at New Century Financial.

Preventing Business Bankruptcy in an Unpredictable Economy

As we enter the first year anniversary since the start of the COVID-19 pandemic, businesses are still facing challenges to maintain cash flow and prevent bankruptcy. Take heart! With increased vaccine production and distribution, it looks like everyone has entered the homestretch to get “back to normal.” Fortunately, there are ways for businesses to prevent bankruptcy as we approach the finish line.

Loans and Business Bankruptcy

When the pandemic hit, businesses struggled to maintain sales while trying to pay off existing debt. At the same time, banks tightened their credit and collateral requirements, making it extremely difficult for businesses to take out short-term loans to smooth over uneven revenue cycles. The first round of PPP loans offered very limited support, and while the economy is slowly entering an uptick, businesses are looking for cash flow solutions that are not debt-based so they can preserve credit and collateral while avoiding bankruptcy.

Cash Flow and Bankruptcy

Whether the economy is experiencing a downward turn, or if it’s on an upswing, businesses can face bankruptcy due to cash flow. Outside of retail and other businesses that use a point-of-sale system, most businesses issue invoices to customers with staggered schedules of 30, 60, or even 90 days. The lag in payments creates a strain on cash flow, with more money being spent than is coming in as revenue. This is especially risky now, when clients may file for bankruptcy themselves before their invoices are paid. Businesses need a way to reduce or eliminate the lag between sales and customer payments.

A Solution to Prevent Bankruptcy

To steer clear of bankruptcy and accelerate cash flow, businesses use accounts receivable factoring. When businesses use factoring, their outstanding receivables are converted into cash quickly, without placing debt on the books. This allows businesses to greatly reduce the time between sales and access to revenue, while also building up capital reserves to weather economic downturns and roll out growth plans during upswings.

At New Century Financial, we are a nationwide leader in accounts receivable factoring services. We factor invoices and make funds available to our clients within 24 hours. We put our clients in control, letting them choose which invoices or parts of invoices we factor for them. If you want to boost your cash flow and avoid bankruptcy, contact the team at New Century Financial today.

Running Your Business Without Debt-Based Loans

For the longest time, loans have been a necessary evil in order for businesses to maintain and grow their operations. In fact, loans have become the default, all-purpose solutions for everything a business needs, whether it’s using short-term loans to smooth over revenue cycles, extra capital to purchasing assets, or as a means to supplement capital reserves to roll out plans for growth.

But are debt-based loans really necessary?

The Drawbacks of Using Debt-based Loans

Regardless of how loans can help in the short-term, there is no way to avoid the negative impacts they have on businesses. Debt-based loans require collateral and lower credit ratings, making it more difficult for businesses to secure financing in the future. And of course, loans place debt on the books. This means that businesses using short-term loans to overcome cash flow challenges might be setting themselves up for a worse financial situation down the line. Cash flow issues are usually recurring, and taking out a loan places debt on the balance sheet that must be repaid through monthly installments. The net result is that revenue is being used to make payroll and cover regular overhead expenses, plus the amount needed to repay the loan. When cash flow problems occur in the future, they could potentially be dire because the debt from the loan makes the total expenses higher than before.

There is a Solution

Fortunately, there is a way to solve cash flow and working capital issues without relying on debt-based loans. When businesses want to pivot away from loans, they use invoice factoring. Invoice factoring is nothing new in the world of business. In fact, there are records of factoring going back to the ancient world in Mesopotamia. The concept is the same now as it was then – a business uses factoring to turn unpaid customer invoices into immediate cash to get fast access to funds and boost cash flow. In turn, the accelerated cash flow allows businesses to build up working capital, reducing and eliminating the need for debt-based loans. Businesses that use invoice factoring do not need to take on unnecessary debt, and they preserve their credit ratings in the process.

At New Century Financial, we offer comprehensive factoring services and convert invoices to cash so you can access funds within 24 hours. Contact our offices today to learn more.

Smoothing Out Uneven Revenue Cycles

All businesses experience uneven revenue cycles, which can greatly impact cash flow and prevent companies from thriving and growing. While many businesses use short-term loans to overcome these recurring obstacles, the debt and impacted credit ratings can create an even larger problem. Fortunately, there is a way to smooth out uneven revenue cycles without negatively impacting finances.

What Causes Uneven Revenue Cycles?

Uneven revenue cycles can be caused by many things. Unexpected business expenses, unpredictable economic downturns, unconsolidated debt – any and all of these things can disrupt cash flow. Even during high sales periods, the total payments received from customers can be well below the calculated revenue due to staggered payment schedules. The most common cause of uneven revenue cycles occurs when revenue is tied up in unpaid receivables with staggered payment schedules of 30, 60, or 90 days. The disruption to finances often forces businesses to take out short-term loans to smooth things over. However, if these cash flow issues are recurring, then loans will only make things worse. The debt incurred means monthly expenses are higher, in order to repay the balance. This can lead to even greater cash flow issues every month, and businesses can quickly reach their lending limits with banks.

Correcting Revenue Cycles

The simplest and most effective way to smooth out uneven revenue cycles is by using factoring services. At its most basic, factoring services are an exchange of unpaid receivables for immediate cash. Unlike traditional loans, factoring does not place debt on the book or impact credit ratings. This allows businesses to correct uneven revenue cycles, boost cash flow, and build up capital to weather obstacles and make plans for growth.

New Century Financial is a national leader in factoring services for businesses across all industries. We can turn unpaid invoices into cash within 24 hours. Our team is committed to giving businesses the flexibility they demand, which is why we do not lock clients into long-term contracts, and we let you choose which invoices or parts of invoices get factored. To get the fastest, most transparent, and most flexible factoring services, contact the experts at New Century Financial today.