Factoring invoices can lift profits, improve productivity and save time.
In this video, you’ll see how a small manufacturing company was able to triple its returns by factoring invoices.
While this is a hypothetical example, it shows you what is possible even for a small company with only one customer.
The facility described in the video is called single invoice finance which is our specialty.
Whatever type of facility you have – and there are many – the first question to ask is:
“Will the benefit of having cash at my fingertips to invest in my business outweigh the factoring company’s fee?”
If the answer is yes and the benefits are significant, what’s holding you back?
Let’s go through the example again.
You build state-of-the-art rickshaws. They cost you $15,000 and construction takes 10 days.
Your customers buy the finished vehicle for $20,000 and pay in 30 days.
So, it takes 40 days for you to get your working capital back, make a profit of $5000.
Rather than waiting the 30 days to be paid you sell the $20,000 invoice for cash you can use right now to build two rickshaws.
As the video shows, your net profit after taking account of fixed and variable expenses is $11,000. While the cost of factoring was $1,000 you’ve almost doubled your income for the month.
Triple your profits
In the next scenario, you decide to sell the two invoices and use the money to build 3 rickshaws.
Because the invoice you sell is of a higher value than before, the fee you pay to the invoice finance company is higher – about $3,000.
Despite that you triple your profits to $15,400
Think about this. The opportunity lost by not factoring invoices would have been more than $10,000.
However by taking your chances you now have a cash surplus you can use to continue growing the business.
Learn more about how single invoice finance works, what other options are available and their benefits to your business please watch the other videos.
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