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.