Business finance software for invoicing: Why it’s important for small businesses
Managing the cash flow of a business can be challenging at times, especially for small business owners. With no financial division to focus solely on the business’s capital, it is easy for small businesses to neglect important elements such as invoicing. With business finance software, you’ll be able to take care of client invoicing and, as a result, factoring will provide you with the necessary funds to help grow your business.
What is invoicing and factoring?
An invoice or bill is a document supplied by a seller to a buyer. It is a receipt that indicates that the buyer must pay the seller according to the amount of products sold and their agreed prices or the services rendered. An invoice can be generated directly using business finance software.
Most businesses allow 30 to 60 days in which clients can pay for the services that were rendered. Factoring is a clever way to get your invoices paid in less than 30 days. It is the process of selling your invoices to a third party (or factoring company) at a slightly discounted rate in exchange for immediate money. The factoring company will be responsible for collecting outstanding debt from your clients, and you will have the immediate funds available to spend on growing your business. Factoring works as follows:
- You provide a service to your clients and invoice them for it.
- You sell the invoice to the factoring company for 70% to 90% of the invoice’s total.
- You receive funds immediately to spend on ways to help grow your business.
- Once your client pays the factoring company, you get the second installment of your invoice, which is 10% to 30%.
How does my business benefit from factoring?
Collecting debt from clients is never a pleasant task. However, with business finance software, billing your clients is a lot easier. Still, slow paying clients make it difficult to grow your business, but by factoring your invoices, you’ll have money readily available to pay suppliers, employees’ salaries and rent.
Factoring your invoices is an easier and more effective way to obtain money than taking out a business loan. Loans can take weeks to be approved and you’ll be required to pay interest, which will cost you a lot in the long run. When you obtain money via factoring, you get the funds immediately and never have to pay the factoring company back – your clients will be required to pay them because they have been invoiced.
Most small businesses offer clients an early payment discount to get clients to make timely payments, but by factoring your invoices, you won’t need to offer the discount – you can bill your clients for the full service charge.
You need a valid invoice to obtain funds via factoring
Because you're using business invoices as collateral to "borrow" money, most factoring companies will ask you to produce an invoice generated from an authentic business finance software system.
QuickBooks offers a selection of different finance software packages that are ideal for invoicing customers. Peruse our range of business finance software packages to help make invoicing simpler.
QuickBooks SimpleStart - for new and home based business
The simplest way to manage and track money going in and out of your business.
QuickBooks Pro - manage your business accounts simply and easily
Manage your business accounts simply and easily.
QuickBooks Premier - fast and easy advanced accounting
Fast and easy advanced accounting.
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