One of the biggest challenges for a landscaping company, especially one that does commercial work, is that clients often pay on credit terms. Large office buildings, apartment complexes, commercial clients, and hotels often demand the option to pay invoices in 30 to 60 days as a condition doing business. As a commercial landscaper, you don’t have a strong negotiating option. Unfortunately, you have to accept those payment terms or risk losing your clients to a competitor.
Slow payments create problems
Slow payments can create financial problems for your landscaping company. You need money to pay expenses, such as plant nurseries, payroll, vehicles, fuel, and equipment. If you have a solid bank account reserve, this payment delay should not pose a problem, as you can use those funds to carry you through until your clients pay. But if you don’t have a financial reserve – or if your reserve is running low – you could be forced to miss or delay an important payment. This consequence can have a negative impact on your business.
Invoice factoring helps your cash flow
One way to handle this problem is by factoring your invoices. This solution provides you with financing by using your slow-paying invoices from creditworthy customers as collateral. As opposed to bank financing, which often requires substantial assets, invoice factoring only requires that you work with creditworthy clients. This aspect of invoice factoring makes it an ideal option for small and growing landscape companies with solid customers.
Manage your business effectively
An invoice factoring line helps you manage your business effectively by improving your cash flow. When used correctly, invoice factoring can help you meet payroll and important supplier payments. It can also help you offer payment terms to landscaping customers who request it. If you have been losing clients because you have been unable to provide terms, invoice factoring can solve that problem.
How does it work?
Most transactions are fairly simple and can be used by landscaping companies. The invoice is usually financed in two installments: the advance and the rebate. The advance is sent to your bank account as soon as you have completed the landscaping work and sent an invoice to your customer. This first installment covers about 80% of your receivable.
Once your client pays the invoice in full on their usual schedule, the factor rebates the 20% that remains. The factoring fee is often subtracted from this second installment.
How to get the best rates
There are a number of steps to take to ensure you get the best possible factoring rates. Factors usually price their services based on the perceived risk of your account and on the volume of your invoices. You can lower the perceived risk by making sure you avoid common mistakes such as submitting an incomplete application.
You should also find a factoring company with experience in your industry, because those factors are most likely to offer the best rates for your industry.
Will it work for your company?
Invoice factoring can help your business if your main problem is that your clients are paying invoices in 30 to 60 days and you need faster payments. In this case, invoice factoring can help stabilize your business and position your company for growth.
Get more information
We are a leading factoring company and can provide you with competitive terms. For information, get an online quote or call (877) 300 3258.