I love game shows.  One of my favorites is Jeopardy.  How about that little word Jeopardy…kind of an ugly definition…it means peril or danger, or hazard or risk of or exposure to loss.  Not the kind of word you want cropping up when talking about your own business!  But, in the spirit of having some fun, let’s play a little game of Jeopardy with regard to your business and see why accounts receivable financing is a consistent answer!

We’re in the second round of Jeopardy and you’re in the lead!  Category is… “Business Jeopardy”

Answer:  Why Your Business Needs Factoring for $200

Question:  Should I hire that awesome new salesperson?

  • Growing your business depends on lots of things, but to start at the top, you need sales.  That’s why they call it “Top Line Sales”.  Without sales you have nothing.  So, any business needs to constantly consider the right time to hire a top notch sales person.  Having access to extra cash available to pay a signing bonus or make a quick commitment to land some solid sales talent often immediately has a positive impact on your business

Answer:  Why Your Business Needs Factoring for $400

Question:  What if I can’t make payroll next week?

  • Making sure you have the funds available to make regular payroll is one of the most critical elements of running a smooth operation.  You aren’t able to afford to damage the relationship with the people that are working for you as you need them to ultimately succeed.  Don’t lose sleep at night when there is a solution to getting access to cash quickly to solve any cash flow gaps that may cause you to miss a payroll.

Answer:  Why Your Business Needs Factoring for $600

Question:  How am I going to pay for my next order from my manufacturer?

  • You just booked a new order from a customer at a fat gross margin and you quoted your normal lead-time for delivery.  The problem is your manufacturer is swamped and told you that a deposit must be made ASAP for you to get an expedited delivery date on the final goods.  Your short of cash at the moment but know if you could bridge the gap, you could deliver on this great new order and book a nice profit.

Answer:  Why Your Business Needs Factoring for $800

Question: Should I invest in that technology upgrade this year?

  • Continually looking for opportunities to create additional efficiencies in your business should be top of mind.  Efficiencies save you money, which creates more profit.  Using the latest technology available is a great way to streamline your business.  So, why don’t people always jump to do this?  There are usually upfront costs, but the ROI on this investment often is very compelling.  However, technology vendors often require significant deposits before they commit the resources to your company and kick off projects.

Answer:  Why Your Business Needs Factoring for $1000

Question:  How do I make my upcoming quarterly tax payment to the IRS?

  • The only sure thing in life, as we’ve heard, is death and taxes.  We all hate paying taxes, but just like clockwork, the obligation shows its ugly head quarter after quarter.  Even with great planning, the ability to have extra cash around to pay for taxes may get crimped because you have an alternate use of cash that seems just as pressing, e.g. paying for raw materials to fill a brand new order from a new customer.

Congratulations…WE’RE STILL IN THE LEAD by $10,000!  Now for the Final Jeopardy Question…Alex Trebek, take it away…

Final Jeopardy Question is, “ What is Factoring”?  Do you all hear that famous music in the background?

Answer:  Factoring is a type of accounts receivable financing.  Companies make sales and as soon as they ship products or deliver services, they send out an invoice, and the result is that accounts receivable (often called “AR”) are created.  AR is an asset and would be classified as such on your company’s balance sheet.  AR turns into cash when your customers ultimately pay you for those invoices when they are due.  However, depending on the terms you provide your customer, you may not get paid for 30, 60, or even 90 days!  You may need that money sooner to deal with any of the important business Jeopardy questions posed above.  So this is where invoice factoring comes in.  An online factoring company works with your company to advance cash to you based on your outstanding invoices.  You effectively “pull forward” cash in the near term based on the asset you have with your AR and not have to wait a month or more for your customer to pay.

OK…I’m not sure all of that answer would fit into the Jeopardy answer screen, or that we could have written it in the time allowed, but the good news is we played it safe and only wagered $1 because we knew we had so much to say about online factoring.

The moral of this article? Don’t put your business in “Jeopardy” due to low cash flow when services like accounts receivable financing exist online to help.