Distributors in every sector play a crucial role to businesses across all industries. From inventory to supplies, raw materials, medical equipment, and more, distributors are part of the foundation of our economy. However, to fill the regular influx of orders, keep supply chains moving, and to tap new markets, distributors need to maintain a healthy cash flow.
Cash Flow for Distributors
In a fast-paced economy where distributors are constantly receiving orders from clients, they rely on revenue to purchase the items needed to fill those requests. Standard business practices have invoices issued to clients with staggered payment schedules of 30, 60, and even 90 days. This means that at any given point – or especially during a peak business cycle – a distributor can experience a period where they are spending more to fulfill orders compared to the payments they are receiving from clients. Many times, distributors will turn to short-term loans to smooth out uneven revenue cycles and stay on top of client orders. Unfortunately, the debt from short-term loans can add up, especially if the disparity between expenses and revenue is a recurring issue.
Achieving Parity for Long-Term Success
One way to achieve a closer ratio to invoices generated and revenue received is through accounts receivable factoring. Accounts receivable factoring is a method by which distributors can leverage unpaid invoices for immediate access to funds, often within 24 hours. A distributor can submit an invoice for factoring as soon as a sale is generated. This improves cash flow and removes gaps in revenue caused by staggered payment schedules. Factoring services are debt-free, so businesses can stop using short-term loans to smooth out uneven revenue cycles. Additionally, accounts receivable factoring helps distributors to build up reserves for marketing and to expand into new regions or markets.
Get Started Today
New Century Financial is a national leader in accounts receivable factoring services. We offer flexible factoring with no long-term contracts or hidden fees, and we let businesses choose which invoices or parts of invoices get factored. If you own a distribution business and want to improve cash flow for long-term success, contact the team at New Century Financial today.