Supercharge Your Cash Flow with Accounts Receivable Financing

Accelerate Your Business: Accounts Receivable Financing Explained

?

YOUR COMPANY IS LOOKING FOR A FACTORING SOLUTION!

Accounts Receivable Financing / Factoring Companies

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the biggest issues facing business today

ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - [email protected]

7 Park Avenue Financial South Sheridan Executive Centre 2910 South Sheridan Way Suite 301 Oakville, Ontario L6J 7J8

?

?

?

Unlock your company's hidden cash potential with accounts receivable financing.

?

7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Financing Receivables solutions and working capital solutions ?– Save time and focus on profits and business opportunities

?

7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”

?

?

Accounts Receivable Company: Financing in Canada

?

?

When Canadian business owners and managers utilize an accounts receivable financing company, the focus is on the dollar value and quality of their trade receivables A/R.

?

Accounts receivable reflects money owed to the company by customers, while accounts payable indicates amounts the company has yet to pay its suppliers.

?

Managing accounts receivable and accounts payable is crucial for maintaining cash flow and solid supplier relationships.

?

That generates cash flow under this process—a transaction in which you immediately monetize your sales for cash at a discount. The obvious benefit is the ability to generate cash flow and working capital for your company from the company’s balance sheet.

?

WHAT IS ACCOUNTS RECEIVABLE FINANCE/FUNDING

?

?

AR Financing allows your company access to the cash flow from outstanding invoices based on what is known as a discount fee - which is often confused with interest rates such as on a business loan.

?

The accounts receivable process involves customer onboarding, invoicing, collections, and cash posting, highlighting how a well-implemented process can enhance efficiency, reduce manual tasks, and minimize bad debt risks.

?

This type of financing is not a loan; it does not add debt to the balance sheet, and companies can fund all or a portion of their sales to generate cash flow and fund the working capital component of their business from money owed.

?

Financing A/R can be done on a ‘standalone’ basis, or it can be combined with an asset-based lending arrangement that typically funds a/r and inventory as well as fixed assets owned by the company. This type of credit facility is an alternative to a business line of credit.

?

Under a straight traditional factor type agreement, the paperwork specifies the sale of receivables as you get funded, while a bank would instead have their paperwork taking and assignment of your receivables.

?

Another solution allows a company to selectively finance individual receivables based on the amount of cash they need or other specific circumstances.

?

?

A/R FINANCING ALLOWS YOU TO FUND A PORTION OR ALL OF YOUR SALES INVOICES VIA THE INVOICE DISCOUNTING PROCESS

?

?

We will add a small technical point here: When describing the process, we advise clients that invoice discounting monetizes their revenues as they generate them.

?

Accounts receivable automation can significantly enhance this process by reducing manual tasks and streamlining operations. This implies that you have to finance those sales all the time and immediately, and that’s not 100% correct.

?

The reason? Simply put, if you are working with the right firm, you can certainly finance any sales you need - it doesn’t have to be all or nothing.

?

And about that ‘ timing ‘ issue. The reality is that you can finance those sales ‘ ANYTIME’ after you make them.

?

Quick example:? You generate a 100k sale to one of your clients, and the client typically pays you in 60 days. (Notwithstanding, your terms are 30 days!) .

?

If you don’t need the cash immediately but need it, for example, around day 45 in this process, you can finance the invoice then.? The benefit - It’s immediate cash when required, and you only pay for 15 days of financing! Talk about a win/win!

?

DON'T LET THE TERMINOLOGY AROUND A/R FINANCING AND FACTORING BE CONFUSING - LET 7 PARK AVENUE FINANCIAL EXPLAIN HOW FUNDING RECEIVABLES WORKS

?

?

Invoice discounting, A/R Financing, Factoring, etc., are all synonymous terms for the process we describe today.

?

Accounts receivable management involves best practices and strategies for optimizing cash flow and payment collection, including using automation software to streamline operations and ensure timely payments. Pricing always causes mass confusion with clients.?

?

Can this confusion be avoided? We think it can when you simply focus on and understand the three elements of A/R finance pricing. This allows companies to determine the best course of a financing action plan.

?

?

UNDERSTANDING 3 KEY ELEMENTS OF FINANCING YOUR RECEIVABLES FOR IMPROVED CASH FLOW

?

The advance rate/ holdback

The discount rate

Time to collect your accounts

?

?

When you have a solid grasp on those, you’ve become somewhat of an immediate Receivables Financing expert.

?

Accounts receivable software can significantly enhance internal and external communications in accounts receivable management. Features such as electronic invoicing and automated reminders facilitate better customer interactions and streamline the collections process.

?

Let’s use a quick example: a 100k invoice. These facilities do not have a real dollar limit, and invoice size, whether large or small, is not a concern either.

?

ACCOUNTS RECEIVABLE FINANCING EXAMPLE: HOW TO COLLECT PAYMENTS

?

You have just invoiced your sale and have 100k outstanding on an invoice. Net credit sales are crucial in determining how effectively a company collects customer payments and in measuring the overall performance of accounts receivable processes, including calculating Day Sales Outstanding (DSO).

?

The Accounts receivable financing company will typically advance, at your request, 90% of this amount.

?

The 10% reserve or holdback allows for anything going wrong, primarily uncollectibility. If your customer pays you in 60 days, as they typically did in our example, you receive the 10% holdback, less financing costs typically 1.5-2% for 30 days.

?

KEY TAKEAWAYS

?

• Invoice factoring forms the core of accounts receivable company operations, allowing businesses to sell unpaid invoices for immediate cash.
• Cash flow improvement remains a primary benefit, providing companies with working capital to cover expenses and invest in growth? and fund on an ongoing basis via newfound positive cash flow what? the company owes on its accounts payables.
• Risk assessment plays a crucial role as these firms evaluate the creditworthiness of invoice-owing customers before purchasing receivables.
• Fee structures typically involve a combination of factoring rates and additional charges, impacting the overall cost of financing of an account receivable facility.
• Recourse vs. non-recourse factoring determines liability if customers fail to pay, affecting the level of risk for both parties involved to collect payment

CONCLUSION

?

If you use traditional A/R financing companies, the finance firm you deal with handles collections.

?

That’s not our recommended solution. We prefer the confidential invoice financing strategy, which allows you to bill and collect your own accounts without notice to any client, supplier, another lender, etc.

?

Of course, we point out that when financing receivables, your accounts receivable financing company partner must, in fact, have clear collateral of your receivables. Many clients we talk to think they can have a bank line and finance receivables via a commercial finance firm. They are wrong! It’s one or the other.

?

Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you in setting up the facility that works for your business regarding monetizing your sales revenues and cash-flow receivables financing to that balance sheet!

?

FAQ

?

How does accounts receivable financing improve my business’s cash flow?

Accounts receivable financing converts unpaid invoices into immediate cash, allowing you to meet financial obligations, invest in growth opportunities, and smooth out cash flow fluctuations without waiting for customer payments.

?

?

?

What types of businesses can benefit from using an accounts receivable company?

Any business that invoices other companies on credit terms can benefit, including manufacturers, wholesalers, service providers, and B2B companies across various industries.

?

?

?

Is accounts receivable financing more advantageous than a traditional bank loan?

Unlike bank loans, accounts receivable financing doesn’t create debt on your balance sheet, offers faster access to funds, and scales with your business growth without requiring additional collateral.

?

?

?

How quickly can I receive funds from an accounts receivable company?

Many accounts receivable companies provide funding within 24-48 hours of invoice submission, significantly faster than traditional lending options.

?

?

?

Will using an accounts receivable company affect my relationships with customers?

Professional accounts receivable companies work discreetly, often allowing you to maintain control of customer communications and preserve your business relationships.

?

?

?

What criteria do accounts receivable companies use to approve businesses for financing?

Accounts receivable companies typically evaluate customers’ creditworthiness, invoice volume in the company's accounts receivable, and business health to determine eligibility and terms.

?

?

?

Are there any industries that accounts receivable companies won’t work with?

While many industries are eligible, some accounts receivable companies may have restrictions on certain high-risk sectors or those with unique payment structures.

?

?

How does the cost of accounts receivable financing compare to other funding options?

The cost of accounts receivable financing often depends on factors like invoice volume, customer credit quality, and payment terms. It is essential to compare with other options based on your specific situation.

?

?

?

Can I choose which invoices to finance, or do I need to factor all of my receivables?

Many accounts receivable companies offer flexible options, allowing you to select specific invoices or customers for financing rather than requiring you to factor all receivables.

?

?

?

What happens if my customer doesn’t pay the invoice that’s been financed?

The outcome depends on whether you’ve chosen recourse or non-recourse factoring, with non-recourse options providing protection against customer non-payment at a higher cost.

?

?

What key factors should I consider when choosing an accounts receivable company?

Consider the company’s industry experience, funding speed, fee structure, customer service quality, and technological capabilities to ensure a good fit for your business needs.

?

Can using an accounts receivable company help my business qualify for other types of financing in the future?

By improving your cash flow and financial statements, working with an accounts receivable company can potentially enhance your creditworthiness and ability to secure additional financing options in the future.

?

' Canadian Business Financing With The Intelligent Use Of Experience '

?STAN PROKOP 7 Park Avenue Financial/Copyright/2024

?

?

?

?

?

Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil