How Accounts Receivable Financing Help Business Accounting

By Provident Commercial Capital February 3, 2017 No Comments

Despite your best efforts, keeping up with your business’s accounts can become a messy ordeal. Numbers can become crossed, invoices misplaced and payments received late, all of which serve to make keeping up with your profits more difficult than it should be. Deciding to use accounts receivable financing is perhaps the best way to remedy this situation, and gives you a much simpler way to handle your accounts than traditional methods.

What is Accounts Receivable Financing?

This is an arrangement made between your business and a third party factoring company of your choice. In this agreement, you sell your accounts receivables and outstanding invoices to the factoring company at a slightly discounted price. This means that you don’t need to wait on individual invoices to be filled, but can get your money right away. It will then be up to the company that’s purchased your invoices to handle the collections process to get their money back. Since this is more of a purchase than a loan, this is the perfect way to get cash flow you need fast without worrying about plunging your business into debt.

How it Helps Your Accounts

The main way in which accounts receivable financing benefits your accounts is by ensuring that your incoming is coming from a single source. You’ll no longer need to deal with dozens of different invoices at once, because you’ve sold them instead to the factoring company. You’ll only need to worry and account for the sum which you receive from this company. This gives you one, much cleaner, more well-rounded figure to deal with when it comes to keeping your finances in proper order.

What are Some Other Benefits?

Aside from fast cash and easy accounting, there are there are many other benefits associated with this arrangement. As already mentioned, this is an excellent way to see to your business’s immediate financial needs without getting into debt, as you would when taking out a traditional loan with a bank or other lending institution. Furthermore, this agreement doesn’t require collateral of any sort, which means both your personal assets and the important real estate, equipment and even vehicles your business requires to run remain safe while you get your cash.

Overall, accounts receivable financing is an option which any business owner should consider, even if they’re not in need for immediate cash. Owning a business is difficult, but simplifying your accounting in this manner can go a long way towards keeping your office organized and making your job a little less stressful.

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