It is an old, bill-paying habit many people have acquired over the years to help them make sure they pay their bills on time. By paying their bills as soon as they arrive in the mail or email inbox, they are ensuring the bill gets paid in a timely fashion without incurring the additional costs of those price late fees. By delaying, the payer runs the risk of forgetting to pay the bill.
While this pay-your-bills-as-soon-as-you-get-them strategy might be a good tip for 20-year-olds learning how to pay their own credit card bill, it can be a poor tactic for business owners and accounts managers. Of course, paying your bills on time is always a good policy, let’s be clear about that. But by paying your bills weeks early you are unnecessarily reducing the amount of cash you have in your accounts, which could negatively impact your cash flow.
Better Manage Your Bill Payments with Invoice Factoring
If you pay your bills within 15 days instead of closer to 30 days when they are due, but your clients pay you on the 30-day payment deadline, you end up with a payment gap. Month after month, this could hurt your cash flow. If a customer pays late, then you could really be in trouble.
Use Factoring Services to Improve Your Bill-Pay Cycle
To help bolster your cash flow and stay on top of your operational cycle, you can get regular cash payments with factoring accounts receivables or invoice factoring. By selling your current invoices to an invoice factoring company, you can know with confidence how much money you will have in your accounts each month so you aren’t waiting on your customers. If they pay late, you will still have the money in your account; the factoring company will handle the late payment for you.
Factoring receivables is a common practice for many industries including: janitorial services, construction, transportation, manufacturing factoring and more. By recognizing the significance of paying their bills precisely when they are due, either the same day or a day or two before, such companies can make the most of the money they have. Accounts receivable factoring brings predictability and confidence to your business accounts in a way that waiting on customer payments just can’t.