If you add up your individual customer Sales Invoices, this will provide you with a total sum of what your customers owe you. This dollar amount is your total Accounts Receivable. Look at this figure as the dead opposite of your Accounts Payable, which is the total amount you owe to your vendors.
Accounts Receivable in More Detail
An official record of an account is a Sales Invoice you have sent to a customer. This Sales Invoice represents a legally enforceable claim for payment for goods or services you have delivered to your customer. A Sales Invoice or Accounts Receivable record will specify “terms” including the time frame in which payment is required to be made.
A Sales Order is produced when your customer orders your product or service and contains the order details needed for both your company’s and your customer’s records. Once the product or service has been shipped or delivered, an Account Receivable record is created from the Sales Order.
A Cash Receipt records the payment (or partial payment) of a Sales Invoice by a customer. A Cash Receipt is a separate accounting item until it is applied to the outstanding amount of the customer’s Sales Invoice (the customer’s Account Receivable). There may be several Cash Receipts to a single Account Receivable.
Your Total Accounts Receivable is an Asset
Your accountant or accounting system will produce a Balance Sheet on which your total Accounts Receivable will be listed as an asset. Payments made by your customers will be applied to your total Accounts Receivable to reduce the outstanding amount.
Accounts Receivable Financing
Because your Accounts Receivable is an asset, you can use it as the basis for obtaining funding in order to grow your company or help you out with cash flow problems. ………………………… is a specialist in accounts receivable financing and provides funding solutions to a diverse array of businesses. Please contact us to learn how we can assist your company.
You have just learned that your application for a working capital loan has been approved, and you are smiling. However, now that you have the money the next step is crucial. You must make an effort to examine your overall business strategy so that you are able to make the best use of your funds. The following are some tips to help you.
Keep Your Loan Funds Separate
You can better manage what you do with your working capital loan money by depositing it in a separate account. Keeping these funds separate is especially important if you plan to use the cash to mainly pay for operational expenses, purchases, etc.
Make a Budget
A budget for use of these funds should have been in place before you applied for the loan. However, if you don’t already have a budget, make one now, so you know exactly how you are going to make use of your working capital funds. You also need a plan aimed at any emergencies that may arise so that you are not forced to turn to your loan money to take care of them.
Don’t Go on a Spending Spree
It’s easy to get enthusiastic about spending just because you’ve acquired this influx of cash. If anything, it’s better to be more cautious about your spending. Always keep in mind that because you have to repay the loan, it’s important to spend it wisely.
Review Your Financial Position Regularly
Make a regular schedule for looking over your finances including both your business’s spending and income. Every week, month or quarter examine your invoices and review your cash flow projections against business volume.
A working capital loan is a valuable tool to help grow your business. Taking the necessary steps to stay actively on top of managing your small business loan can produce a healthy return on your investment. A reliable lending partner such as …………………. can be by your side as you build your business. We can smooth the path from the application process through to repayment.
Your inventory constitutes an asset against which it’s possible to borrow money to help improve cash flow, cope with various business expenses, or purchase more inventory. However, inventory financing is more expensive than other kinds of funding options, so you should first look at financing your accounts receivable or obtaining an asset based loan. If these routes don’t work for you or don’t provide sufficient funds, then consider using your inventory to obtain financing.
How Inventory Financing Works
After you have purchased inventory, you submit a draw request to the lending company who will advance you up to 80% of the inventory’s appraised value. Lenders use the Net Orderly Liquidation Value (OLD) or the Forced Sale Liquidation Value (FLV). These valuations are always lower than your inventory’s market value and can make it difficult to obtain sufficient funding.
Inventory Financing is Expensive
Generally, businesses must apply for a minimum of $500,000. This is because the lending company needs to perform expensive due diligence, including examining your facilities, reviewing your accounting and inventory systems, appraising your inventory and raw materials and regularly monitoring your inventory.
Requirements to Qualify for Inventory Financing:
Your business must have:
- Marketable inventory or raw materials.
- A perpetual inventory management system.
- Reliable financial statements.
- Exhausted other financing options.
Advantages of Inventory Financing
- Your inventory can be leveraged.
- You can accumulate sufficient inventory to meet contractual obligations.
- Easier to obtain than conventional financing.
- The amount of financing can grow with the growth of your business.
Purchase Order Financing
Purchase order financing allows you to finance inventory needed to fulfill a specific purchase order from a customer. However, this type of inventory funding only applies if your inventory consists of finished goods from a third party vendor and your profit margins are above 20%.
Inventory financing is an excellent funding option if your business is a good fit for it. ………………………………………………. can provide your business with the most suitable type of financing, so contact us today to discuss your options.