Who doesn’t want his business to grow! Besides the stakeholders, suppliers, and customers in a business mechanism, another vital aspect that needs special mention is the balance sheet. If the balance sheet is not prepared, meaning, if one is not paid for all the steps that one carries out (like completing assignments, delivering them, or shipping products), it isn’t easy to assess the business’s turnover. In case managing balance sheets and related financial works are not one’s cup of tea, one can rely on the factoring in Nova Scotia.
What is factoring?
Factoring is for both small-scale and medium-sized businesses. It is a method by which a company’s finance is curated in a way devoid of any long-term banking record maintained by a financial lender. A unique way of getting access to the funds tied to the business’s receivable account is by factoring in Nova Scotia.
If any business faces problems with the cash flow and fails to manage it, a factoring company can come to aid. Some of the payment issues can be delayed customer payments or customers paying at a long timespan. The work of factoring companies is to buy invoices of a company that is suffering from cash flow and then enhance its value. In a way, the companies that deal with factoring in Nova Scotia act as intermediaries between the business and its client. Here, the responsibility of a factoring company is to gather the money from the clients and transfer it to the business’s account.
How does factoring work?
The process of factoring invoices of a business organization is not complicated at all. But, first, one must understand that factor invoice implies handing over the control of receivable accounts to the factoring company, either partially or wholly. The factoring of invoices is done in the following ways:
Step 1: The business organization delivers goods or services to the customers as a normal process.
Step 2: The customers are handed over the invoices of the goods and services they receive.
Step 3: These invoices are then sold to a factoring company. On receiving the invoices, the factoring company then verifies the invoices and immediately pays almost 70% to 90% of the amount to the business organization.
Step 4: The customers pay the money directly to the factoring company in charge of the whole process. If required, the factoring company can chase customers for payments.
Step 5: After receiving the full payment, the factoring company pays the remaining 10% to 30% to the organization and deducts their fees.
Benefits of factoring
Given below are the advantages that one can achieve via factoring one’s business’s payments:
- It enhances the cash flow into the organization.
- It delivers more accurate forecasts, and lets companies plan things.
- Better cash flow means the business is in a better position.
- It minimizes business overheads.
Therefore, if a business notices troubles in the cash flow or has an intention to grow, it should immediately take the help of professional factoring services.