Operating a telecommunications equipment maintenance company can be lucrative. Companies specializing in areas such as cell tower maintenance or corporate telecom equipment repair can usually charge premium prices because of their specialized services.
However, most companies in the field can be difficult to manage due to significant equipment costs and high labor costs. In fact, managing the financial aspects of a telecommunications maintenance business can be complex.
Costs are constant
Unless your company has been in business for a few years, most equipment suppliers ask for quick payments. Some suppliers may offer you payment terms, but the terms will be short – 10 days or fewer. Labor expenses (i.e., payroll) are also paid regularly, as most telecom technicians and engineers are paid weekly or bi-weekly.
Both of these expenses create a regular outflow of money. Since these expenses are critical, they must be paid on time to ensure that the company runs smoothly.
Revenues flow slowly
On the other hand, revenues usually flow in slowly because most telecom, industrial, and corporate clients pay invoices on net-30 to net-60 day terms. Large companies make great clients, but they always ask for terms and include these clauses in their contracts. There is often little you can do except to wait for payments to arrive.
The source of cash flow problems
The source of most cash flow problems for telecommunications equipment maintenance companies is simple: costs are high and constant, but revenues trickle in. This delay can mean that your company is profitable but has little cash.
If cash flow problems are not fixed, you could develop serious financial problems. At the very least, you won’t be able to grow your company. At worst, you could lose clients or go out of business.
The solution: invoice factoring
One way to solve this problem is to factor your invoices. Invoice factoring works by financing your invoices from slow-paying corporate, industrial, and telecom clients. Basically, a factoring company provides you with funding, using your accounts receivable as collateral. The transaction concludes when your client pays the invoice in full, on their regular schedule.
This solution accelerates your revenues. Instead of waiting up to 60 days to get paid by a client, you receive funds from the factoring company. This accelerated revenue improves your cash position and provides the money to pay for equipment, labor, and other expenses.
More importantly, it allows you to offer net 30 terms to your clients while avoiding cash flow problems.
Why use a factoring company?
Working with a factoring company has advantages over using conventional business financing. Most factoring companies can work with small equipment maintenance companies with short track records. You don’t need substantial assets or collateral as long as you work with creditworthy telecom, industrial, or commercial clients.
Furthermore, factors are comfortable working with maintenance companies with cash flow problems, as long as they have a viable strategy for growth. For more information, read “How can factoring companies help you“.
Some invoice factoring companies can also handle progress payments, in which you bill a client for the completed portion of the work. These types of contracts can be more difficult to finance and often require a higher level of verification to ensure that the client is happy with the current deliverables.
Invoice factoring can’t help you if you need mobilization capital – money to cover the expenses to start a project. Unfortunately, factors can only finance invoices for which work has been delivered and accepted by the customer.
Can factoring help you?
If your main financial problem is that your clients are paying slowly, and you need money sooner to pay expenses, factoring should be able to help you. This solution improves your cash flow, allows you to offer payment terms, and positions you to take advantage of growth opportunities.
Get more information
We are a leading factoring company and work with telecommunications equipment maintenance companies. For information, get an online quote or call (877) 300 3258.