Factoring invoices can lift profits, improve productivity and save time.
In this video, you’ll see how a manufacturing business tripled 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.
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.
The company builds state-of-the-art rickshaws. They cost $15,000 and construction takes 10 days.
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 and make a profit of $5000.
Rather than waiting the 30 days to be paid, the company sells thel the $20,000 invoice for cash it can use to build two rickshaws immediately.
As the video shows, the net profit, after taking account of fixed and variable expenses, is $11,000. While the cost of factoring was $1,000 the company almost doubled its income for the month.
In the next scenario, the company buys two invoices and uses the money to build 3 rickshaws.
Because the invoice amount is of a higher value than before, the fee is higher – about $3,000.
Despite that the company triples its profits to $15,400
Think about this. The opportunity lost by not factoring invoices would have been more than $10,000.
However it now has a cash surplus 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.