Finance Why Opt For Receivables Finance

Businesses can also fund their day-to-day operations through their receivables. These form part of the business assets. They are also money from accounts that are due for payments.When receivables are not managed properly (for instance, they are not paid in a timely fashion), businesses can expect a negative cash flow and accrue debts. In general, receivables are quite tricky to manage, especially for smaller companies that are not ready to assert themselves to get hold of what essentially is already theirs. Most of these businesses don’t really know how to make customers pay up without severing ties or scaring them away.To avoid this kind of problem, it is important to manage receivables wisely and to free up capital that is stuck in accounts receivables. There are varied payment schemes to look into, such as progress billing. This scheme involves a down payment of up to 50 percent of the contract price and this has to be paid after signing the service agreement. After that, 20 percent has to be paid after certain services are delivered. Lastly, the remaining 30 percent is provided after full service is delivered.


Another popular scheme is receivables finance. This is an arrangement that a lot of trusted banks offer to clients with businesses. This is a highly strategic approach to managing receivables to protect business operations. This type of financing offer the following benefits to business owners:Better cash flow and improved forecasting. This means no more scrambling around for necessary funding for operations or halting business activities due to lack of funds. If your business qualifies for this finance solution, you can access up to 90 percent of invoice values shortly after they are issued.Maintenance of good business relations. Business connections can get easily ruined when payables are not honoured according to schedule. With receivables finance, payment to suppliers can be done according to schedule and this is achieved much more easily. In addition, timely production or delivery of services can be effectively maintained. This, in turn, helps uphold the good image and reputation of the company to its clients.


In case of a default, the lender (or the bank) has the right to collect receivables straight from the identified debtors of the business. The business can operate as usual and do what they are doing to grow and generate more income.Lastly, the visibility of receivables will be improved. Opting for receivables finance can improve the way companies manage their working capital, as well as have a better strategy on how expenses can be more efficiently handled.