Posted in Finance

Top Tips to Make the Most Out of Account Receivable Financing

Accounts receivable serves as the money that keeps the business from running. When you issue a bill, you’ve made a sale from it. When you get the payment from the invoice, you’ll gain profit from it. When the list of your customers expands, the business will grow.

However, the pitfall is that outstanding or unpaid invoices also represents the money that you could be utilized for other business needs, such as increasing inventory supplies, or employee’s payroll. Luckily, you can make a good deal out of your account receivable items by utilizing Receivables Financing.

Strengthening Your Invoice Factoring

Account receivable factoring or financing is an alternative way to get cash to help the expansion of your business. Other business owners utilize this financing option to save their business from closing down. Making the most out of invoice factoring begins with being aware of the management and customer relations.

  1. Easy to Understand Terms and Conditions

There should be no confusion in the minds of your consumers about your business’ terms and conditions. It is always a good idea to establish a contract in the first place with any customers to whom you want to extend credit.

Also, when you changed any of your terms and conditions, make sure that the customer will sign up on the new contract. This is to avoid any issue from the future, remember, your goal is to establish proper management and customer relations for the sake of invoice factoring.

  1. Be Organized

Make sure that your accounts receivable are in order before you jump into factoring. As a business owner, it is your responsibility to know which customers have unpaid invoices. Check if these unpaid invoices are already past due, how much money you’ve made in your account receivable book. You can achieve this by organizing all the invoices and make sure to pile them up or store them to a computer that you can easily access.


Moreover, each one of your customers should have a file that included their application and all the documents that you send to the customers. Doing so will be added to the invoices and payment history in your system, which can give you a piece of more detailed information about your customer’s creditworthiness.

Make sure that all the payments that have been accumulated from the customers should be entered on the system within a specific period. Doing so will enable you to track down which invoices are still unpaid.

  1. Implement Credit Limit for New Customers

When you come up with a decision to extend your credit to a new customer, it is highly recommended to implement a credit limit. Doing so can help you identify their payment habits before planning to extend their credit. Also, don’t forget about your terms and conditions when it comes to credit limits. You must provide a piece of information on how your customers can work out to have a better credit limit in the future.

  1. Check Your Customer’s Creditworthiness

Aside from the credit limit, you should also check your customer’s creditworthiness before extending a hand of credit from them. This may begin with a credit reference or credit application. An invoice factoring firm can do this checking on your behalf.

If you want to save or expand your business, or perhaps you want to boost your business cash flow, account receivable financing is the solution for that.