The 3 Industries That Benefit the Most From Factoring
Accounting practices in-house may not be an ideal way for your business to handle billing and invoicing. This can happen when dealing with a massive influx of accounts receivable items to reconcile.People and other businesses may be slow to pay for goods and services. If this money is not collected timely, a business can suffer from a cash flow problem causing far-reaching issues. When a company decides to look elsewhere for accounts receivable processing, it usually does so through a system called factoring. This practice typically consists of a business selling its invoices to a third party to collect.
Some industries are more likely to use and benefit from this process than others. Doing so allows them to make more money by concentrating on providing services to customers.
- Logistics and Trucking
Moving goods from port to distribution centers to retailers is still primarily done using trucks. All of that coordination requires logistical tracking and lots of invoices. Thus, the trucking and logistics industry is probably one of the top sectors to benefit from factoring. If a trucking company needs a sizable amount of cash up front to take a haul that will net them even more money, they can use a third-party company to handle it. The third-party company can purchase the invoices before the trips are made, and the trucking company gets the cash flow they need. The third-party company then collects on the invoices after the job is complete.
- Medical Facilities
Hospitals and clinics may also benefit from using factoring. Since medical facilities typically bill well after a procedure or hospital stay, they may wind up short on capital. To prevent this, selling their accounts receivable department to another company gets them the money needed to continue serving patients and purchasing the necessary medicine and equipment to do so.
Farmers need to be able to transport their crops and livestock before they get paid for them. Using factoring to process invoices and orders can frontload farmers the cash required to get their goods to exchanges and markets where they can be distributed to mass retailers.
Any industry that needs to collect money from a large number of people or companies would benefit from utilizing factoring companies. Doing so allows businesses to get the money they need in bulk without having to go through the hassle of collecting from multiple invoices. Proper accounts receivables processing and collecting are essential to keeping a business thriving.