Revenue is what allows businesses to thrive and grow. Beyond that simple law of commerce, revenue allows businesses to pay their employees and fill orders from their customers. However, a large portion of businesses cannot touch revenue from their sales because it is tied up in unpaid customer invoices. If businesses cannot access their revenue, how are they supposed to continue serving their customers? More importantly, how can businesses unlock revenue from unpaid invoices faster?
Revenue and Staggered Payment Schedules
When businesses issue invoices, their customers have a window of 30, 60, or 90 days in which they must submit payment for their purchases. These staggered payment schedules – in theory – are supposed to create a constant stream of revenue for businesses. The truth is that many customers, when given a schedule of a month or longer, will take their time and pay their invoices only when necessary. This tendency can severely slow down cash flow for businesses, and in some cases, the staggered schedules can cause gaps in revenue.
The Danger of Loans
When staggered payment schedules place a strain on cash flow, businesses are tempted to use short-term loans to smooth out finances. Yet short-term loans are only a quick fix. Like other loans, they place debt on the balance sheet and lower credit ratings. Any revenue that comes in after the loan has been used must be stretched to cover operating costs as well as payments to the lender. Additionally, staggered payments may cause recurring cash flow issues, which means more loans, and that means more debt. Loans can cause more problems than they solve.
Unlocking Revenue
When businesses want to unlock the revenue that is tied up in unpaid customer invoices, they use invoice factoring. The process is fast and does not place debt on the books. When an invoice is created, it is submitted for factoring. The invoice factoring company then turns the invoice into cash, subtracts a small fee, and then makes revenue available to the business. Invoice factoring eliminates long waiting times caused by staggered payment schedules and allows businesses to get fast access to revenue.
New Century Financial turns unpaid invoices into cash within 24 hours with no hidden fees or long-term contracts. To unlock revenue from your unpaid customer invoices, contact New Century Financial today.