Financing Accounts receivable – Art of happiness

by Augustus Callen

Four thousand years ago, long before the bank was found, the concept of accounts receivable, or factoring, was found somewhere in the midst of the Roman Empire. Why does this make traders happy? Because they will be paid for their merchandise for months before payment for merchandise they are accepted. With this cash, suppliers, employees, and the imperial tax authority can be paid. This financing agreement is based on long-term relationships and trust.

Two hundred years ago financing trade receivables evolved in the United States, especially for the textile industry, for the same reason: to accelerate growth and profitability by accelerating cash flow. Again, long-term relationships and trust are the main basis for regulation of this financing because there is no effective court system to enforce international contracts for purchasing European fabrics for American factories.

Thirty years ago the concept of financing accounts receivable, or factoring, it was considered to be on the outskirts of honorable financing for products or services other than textiles. It is considered radical to finance relatively high business receivables. Since then financing receivables have evolved into a multi-billion dollar industry. Long-term relationships and trust are still very important because when you take advantage of accounts receivable, you entrust the commercial financing company with the source of your business life – your cash flow.

Let’s make assumptions. The purpose of life is happy. As a business owner, you are happier if your customers pay immediately when they receive your invoice as opposed to months later. As a business owner, you are happier if you are more profitable when you sell more goods or services with greater profits.

Financing accounts can be a tool that allows for further capacity, more flexibility, more fluidity, more efficiency, and more sales if you have to provide credit requirements to your customers and your internal cash flows, or bank financing will not follow your needs for Cash to grow. So, you need to ask yourself, are you happy with the status quo? Do you feel like you are stuck because your expenses and operational costs are too high? In your business life, do you feel like you are detained from success – like receiving “Don’t pass away, don’t collect $ 200” cards from the game, monopoly?

Here are some questions to ask yourself about overcoming obstacles to your happiness and success: What is your market? Is it local, national and / or international? What are your short-term and long-term challenges? What is your customer base? What is the sale and distribution strategy of your company? What are your strategies to accelerate growth, market presence, and penetration? Do you have a strong gross margin with additional opportunities to encourage operating efficiency when you do a business scale up? Will you be aware of an increase in margins as a result of increased sales? Query: Can your business expanded exponentially if you have almost unlimited financing? Is this a reasonable goal and will this make you happy?

You need to evaluate the effectiveness of financing costs versus scalability and your own company’s ability. Financing accounts receivable can be your solution to your happiness and success as a business owner.

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