The holidays are over and your sales were great, okay, or disappointing. Maybe you’re not a retailer and your service business revenues actually fell off over the holidays. After all, people are distracted and sometimes postpone paying bills, hold off on new business, and generally are not keeping their regular work schedule.
To stay afloat, even in a booming economy, having working capital to purchase inventory or just to meet payroll is critical for a business’s success. Small business owners juggle until they become masters of the art, but sometimes they need some outside strategies.
Take a deep breath. If the business is generally in the black, but just hit a snag, it’s time to evaluate.
Consider some of these ideas and solutions for getting back on an even footing:
When money is tight, contact firms or clients that have an outstanding balance and remind them of their balances due. Your best person to do this should be firm, calm, and understanding. Your in-house collection person should have flexibility to make terms with them.
Maybe the client pays you some of the funds every two weeks plus any new monthly amounts until they’re up to date. Let them know how much you value a continued relationship and how it is important for your firm. Remind them of the value you provided. Don’t get emotional, but be empathetic. Remember, this will save your hiring an outside collection firm that will take a large chunk of the funds.
This can be accomplished in several ways. Provide incentives to sales staff for increased sales with tight deadlines. Get publicity by finding a “hook” to attract business. Launch a quick online campaign. Although in the long run this may be a valuable strategy, to receive the immediate funds to meet payroll and other critical needs, consider pairing this with other, quicker, approaches.
Acquiring a financial infusion through a Bridge Loan could be a solution, especially if you expect a major infusion of cash soon. If a business has been in existence for years and has records to prove it, obtaining working capital to meet payroll should be quite possible. Allow some time. Rates can be high.
If a retail business has a track record, with records to prove it, some funding sources can make approvals and provide cash within as little as 24 hours.
“Covering payroll or other critical needs is essential for merchants. Providing the capital needed with a flexible approach for pay back is also critical for a business to be viable. As a subsidiary of the largest payment services provider, North American Bancard, we’re able to work with you to provide the vital resources your company needs. Accessing the cash is quicker with our services,” said Rhett Rowe, President, Capital for Merchants.
You have receivables. You need them made into usable funds — and quickly. Invoice factoring allows you to receive funds based on the value of your receivables, but requires a percentage paid to the factoring firm. A good target amount to receive from a firm that provides invoice factoring is 85 percent and above. They will hold an amount in reserve until the invoice is paid, at which time the reserve amount will be returned minus the fee.
Be aware of potential additional fees and avoid dealing with any firm that is not open and upfront about fees. Weigh the fees versus how long it takes to get your funds. If you can get your receivables paid quickly, then press for your clients to pay. Invoice factoring funds can often be accessed within one to several days. But, are you likely to be approved — which will also depend on the track records of your clients.
Also, be aware that the invoice factoring firm can contact your clients unless you have a “Non- notification factoring” arrangement. Review the factoring firm’s track record with customer service, since without the non-notification clause, they might be talking to our clients.
The invoice factoring option can be a good approach in a tight situation, but make sure you’ve chosen the correct firm.
As they often say in media, “It’s not personal, it’s business.” But, business can be extremely personal when payroll is not met or funds for vital services are not available. Finding the most appropriate approach to obtaining funds is the easiest way to end the juggling act.