Scaling your business with invoice factoring

Attention CFOs: Here’s how to protect your business through uncertainty

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As the world slowly starts to reopen, focusing on these four areas will be critical for CFOs and business leaders.

CFOs

Running a business is difficult. Factor in instability and socio-economic challenges influenced by an ongoing pandemic, and it becomes downright impossible. But there are so many organizations that are persevering, regardless of the many challenges created in the past year. 

Business leaders are using these hurdles to create new opportunities, shift gears and improve processes. They’re leveraging change — if they have the agility to do so — and protect their business through uncertainty and risk.

This is particularly true for the finance role. More particularly, CFOs must be prepared to mitigate risk for their organization in both the short and long term. Here are key ways finance leaders can adapt and manage that uncertainty:

Plan business around liquidity

CFOs can overcome some uncertainty by making strategic real-time decisions that focus on the most urgent liquidity needs first. Naturally, leaders need to take immediate action to preserve cash flow, so prioritizing business needs will help focus your attention. 

 

> What can leadership do to raise more capital?
> Can we get a loan to cover expenses and operational costs?
> How can we speed up our invoice payments?

 

Partnering with a lending company that always has your back and can support you with speed and precision is important. It’s like having a special phone line to capital. 

Liquid Capital (as our name suggests) offers funding to businesses that need to meet business demands without adding more debt to their books. Using invoice factoring, businesses can sell unpaid invoices from credit-worthy customers and inject capital into their organization. This enables them to adapt to change quickly and meet the pressures of doing business today.

For example, Best Broadcast, a fast-growing AV company based in Toronto, Canada, uses factoring from Liquid Capital to overcome cash shortages in slower months to pay for operational expenses and employee wages. 

Adopt a hybrid work model

How CFOs work during uncertainity

The entire world has been working remotely for the past year. But as the world slowly starts to reopen, we’re seeing many companies bring on a hybrid work model to their organizations. Now, companies are offering their employees the chance to choose where they want to work from — the home, office or both — and many are choosing to adopt a hybrid work model. 

From a financial perspective, it makes sense for CFOs and business leaders to shift to a work setting that encompasses the best of both work modes (remote vs. in-office). When you have fewer people in the office, you’re not just cutting down on rent for bigger office space but also reducing the costs associated with keeping every employee in the office. Think office supplies, utilities, and those fully-stocked kitchens!

A recent survey indicates that 84% of CFOs and business leaders in a traditional work setting plan to bring employees back in waves, while 5% plan to keep employees working from home permanently. Obviously, the preference changes from company to company, so it’s best to analyze how much it would cost to take on a hybrid work model and offer flexible work opportunities to employees after running the numbers.

Use technology to upskill and reskill roles

In a world that is becoming more open to automation, finance has an opportunity to transform from being the gatekeeper of transactions into a strategic guide for their organizations.

This means helping teams upskill or reskill to manage macro-challenges and truly transform into a modern workforce for the CFO. The emergence of machine learning and data-driven technologies can drive up change and financial leaders should adapt their role to welcome more AI-based tools.

New technologies can streamline manual processes and help them make strategic business decisions with a long-term approach. Instead of being scared of robots or machines to take over the finance department, CFOs can also use emerging tech to predict the need for cash flow better and forecast any business funding needs that may arise.

Build trust and transparency

CFOs during uncertainity

Transparency is key to doing business today. And finance has its part to play in building trust and clarity among customers and stakeholders in their company.  

CFOs can do this by using up-to-date data from different sources and business functions and delivering central insights to everyone involved in an organization to drive better participation and enhanced decision-making. It’s vital that CFOs notify stakeholders about the measures they’re taking to protect cash flow and outline tactics to ensure preparedness during uncertainty. 

Business leaders and CFOs can ensure consistency when it comes to being transparent and honest:

  • Communicate regularly with employees about how the company is doing, changes that will go into effect to tackle uncertainty, and how it will influence them or their roles
  • Inform suppliers and vendors of real-time changes to avoid interruptions to their services
  • Bring up to date lenders on the need for cash flow and discuss discounts you may need in the present or the future 
  • Speak with investors to gain strategic insight and access financial support

Why change matters

Making agility the number one priority while supplying the organization with the right tools and direction to make better decisions is critical. And grasping how finance will achieve what the business demands — from any location —  along with a heightened need for trust and transparency is imminent.

But perhaps the most important is the need to reshift your business operations to focus on liquidity and the willingness to inject capital by partnering up with a lending partner, such as Liquid Capital, when required.

 

To find out how we can help, get in touch with us today and get access to your own money through invoice factoring.

 

future business funding - alternative lending

What does the future of business funding look like?

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future business funding - alternative lending

The pandemic has changed the way businesses operate — including the finance industry. Some financial institutions have become more conscious of consumers and businesses during the past year and have pivoted to offer greater flexibility, support and leniency to borrowers. However, other businesses have experienced the opposite — with greater challenges accessing capital.

We’ve already seen the change come into effect in some parts of the world. In Canada, central banks have cut interest rates extensively, offering historically low borrowing rates to boost economic activity. In the U.S., mortgage lenders saw a rise in refinancing applications as the Fed lowered interest rates down to 3.45%. 

But the changes brought to the financial sector go beyond slashing rates and offering more favourable borrowing terms. For leaders and CFOs of small and medium-sized businesses, this means they should be prepared to shift gears within their organizations and embrace the following future business funding trends: 

1. Digital transformation 

The banking industry is more keen than ever before to adopt technology that will help them assess credit-risk factors for borrowers and automate much of its underwriting processes. 

Similarly, many business and finance leaders in small businesses will be investing in technologies to help them better plan and prepare for cash flow and manage expenses. 

According to PwC, nearly one-third of CFOs surveyed already look to tech-driven products and services to revamp their business in light of COVID-related restrictions and allocate cash flow where it’s needed the most. Using digital savvy-tools, CFOs can better predict when they’re likely to experience slow cash flow months and apply for funding strategically. 

2. Alternative lending 

The harsh reality of the pandemic is that banks are only lending to SMBs with no risk at all. 

It is a daunting task for businesses, which often have low-to-moderate risks associated with their organization, to receive funding from traditional financial institutions. Last year, about 70% of U.S. small businesses owners applied for the Cares Act Loan (backed by the Federal government but executed by banks) but it’s still unclear how many actually received any financial support. This is just one example of how banks run on a risk-averse basis.

Instead, alternative lending companies have stepped in and reshaped SMB funding, helping to bridge the gap that traditional bank lenders cannot fill. Lenders such as Liquid Capital build relationships with businesses based on trust, knowledge, experience and expertise. This way, SMBs always have access to capital without having to go through a long drawn out process, without knowing if they’re even eligible for a loan or not. 

3. Business funding will become more agile

future business funding - remote work

Doing business is not just about getting your products to market — it’s also about protecting your cash flow. If you don’t have access to working capital, you can quickly fall behind on payments and find yourself in financial trouble before you know it.

In the U.S., 50% of companies now consider themselves under severe financial strain and millions have indicated they may have shut their doors for good. To help these struggling businesses, the banking industry will need to find creative, versatile solutions. 

Many banks have started working with alternative lenders, such as Liquid Capital, and refer clients who don’t meet their underwriting standards to us. We are happy to work alongside our colleagues in the traditional banking system to ensure business owners, CFOs and leaders get the right product to keep their business healthy.

Our business funding services and products, including invoice factoring, asset-based lending, PO financing and other solutions, can be leveraged during various stages of business. During good times, this can further increase cash flow and help leadership make strategic moves. In downtimes, these solutions can help companies bounce back or prepare for an emergency by maintaining their cash flow during disruptive economic environments.

 

When you work with Liquid Capital to leverage invoice factoring (one of our main solutions), you get access to money owed to you through your open invoices — and get paid sooner. Many SMBs who are more familiar with traditional funding such as business loans and lines of credit are surprised to learn that invoice factoring does not add debt to your books. Instead, it quickly injects capital into your business. 

 

Is your business prepared for the future of business funding?

As business leaders and CFOs consider how to prepare for the many changes the future will bring, the time is now to adopt new technologies that will help them streamline their cash flow, develop relationships with alternative lenders so they always have access to working capital, and be prepared for change and disruptions. 

Invoice factoring vs. bank loan - deal

Invoice factoring vs. bank loans: Which cash flow boost do I need?

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If you’re looking for a bank loan, line of credit or traditional funding option (but might not even be able to qualify), there are other options. When comparing invoice factoring vs. bank loans, your business can access more cash flow, and faster. Here are 16 ways that invoice factoring can be the better option. 

Invoice factoring vs. bank loan - deal

If you own or operate a company, you probably know the challenges of finding business funding. Relationships with banks are important, but sometimes bank loans don’t work out. That’s where alternative financing options such as invoice factoring, also known as accounts receivable financing, come in handy.

Invoice factoring allows you to access cash against your existing and ongoing customer invoices. You’ll work with an invoice factoring partner who will provide you working capital and take over the collections of those accounts receivable in return for a professional services fee.

When a company needs cash flow, invoice factoring can be the quick and reliable solution to keep your business heading in the right direction. Here are the additional bonuses to using invoice factoring vs. a bank loan that you may have never considered:

1. Get faster funding

If you need to urgently buy supplies, order product, make payroll or repair key equipment, invoice factoring can be easier and quicker to secure than traditional bank loans and lines of credit – sometimes as quickly as 24 hours after submitting your invoices. Unlike a traditional bank loan, you don’t need to submit tax returns, detailed financial statements, business plans or your financial projections – saving you a lot of time and hassle. Banks can also take longer to approve your requests, potentially making you wait for fiscal year end or the results of an audit. Instead, your factoring partner will perform an initial underwriting process to approve your application – then you’re all set.

2. Flexibility – Borrow more when needed

The amount your company can borrow will actually grow the more you sell. As your business grows, you’ll need even more cash flow to pay for supplies as you wait for customers to pay their invoices. So invoice factoring gives you the immediate ability to borrow more, and keep the growth going. Compared to traditional banks, you will never outgrow your line of credit, as a big enough factoring company can accommodate all your growth needs.

3. No other assets required

Factoring only requires that you have customer accounts receivable to secure your funding. You don’t need other assets like real estate, equipment or inventory to apply. That means your personal home or property doesn’t have to be offered up as collateral, which may sometimes be the case with traditional bank loans. (If you do have those other assets, you can also qualify for additional funding options like Asset-Based Loans).

4. Cash flow boost when you need it – now or ongoing

Invoice factoring vs. bank loan - calculations

Whether you need a longer-term solution or a temporary boost in cash flow, invoice factoring can help you out of a tricky working capital dilemma. Every business will eventually run into the need for more cash on hand – so with factoring, as soon as new orders are invoiced you can have cash released into your business account. This gives you the chance to take advantage of growth opportunities that require more consistent cash flow.

5. Get larger funding than banks

Unlimited funding sounds amazing. With invoice factoring, lending power is dependent upon the size of your accounts receivable – so an abundance of working capital is possible. Banks qualify you based on your business credit strength, whereas your invoice factoring partner looks to your accounts receivable and your customer credit strength. If you’re selling goods or services to financially strong customers and have ongoing invoices, you can get substantially more financing than you’d qualify for with a traditional bank lender.

6. Grow your business the way you want

Instant cash means you can accelerate your growth strategy. Some companies need to hire more sales people to secure new accounts. Others will need additional equipment to manufacture their product. Still others may need working capital for marketing and advertising, office upgrades or new project development. Whatever the need, you’ll have the working capital to execute and grow the business.

Related: How high-growth companies can get unlimited cash flow

7. Take advantage of supplier discounts

Volume discounts, early payment discounts or special supplier offers are attractive options – but only if you have the capital available at that moment in time. Traditional bank loans are often not fast enough to allow you to take advantage of these discounts. But now, you can factor invoices quickly and free up cash flow to jump at the opportunities when they present themselves.

8. Shorten your cash cycle

Waiting for customers to make payment is a burden. With invoice factoring, you can significantly shorten your cash cycle. Instead of waiting 30, 60, 90 or more days for traditional payment terms, you can receive that payment from your factoring partner in as little as 24 hours. By the time your original terms would have come due, you could have now been able to purchase more goods, make more sales and earn higher profits.

9. Free up your time

invoice factoring benefits - warehouse

Searching for funding and traditional bank loans is a time-consuming process. Meetings, business plans and applications take up a lot of your valuable schedule that could be spent on other areas of the business. With factoring, you’ll have to complete the application process, but once approved you can regularly factor your credit eligible invoices and save time while improving cash flow.

10. Lower your overhead costs

Since your invoice factoring partner takes over the management of your invoices, including handling customer payment and collections, your costs in these departments will likely lower. This can help offset any fees and makes factoring an even more attractive solution. You won’t get that service at a traditional bank.

11. Focus on new revenue

You and your team likely already spend a lot of time processing customer invoices and collecting payment – maybe too much time. With those duties removed from your to-do list, you can now work on other tasks that will improve your revenue like sales, marketing and building new client relationships.

12. Faster collections

Invoice factoring advantages

Prompt and professional collections can be a big bonus when you work with the right factoring partner. With a reputable company handling customer collections, the result can be more timely payments (customers don’t want to risk a poor credit report). Once the customer makes their final payments, you’ll also receive your reserve funds from the factoring partner – so on-time collections are important to everyone.

13. Improved credit checks

Your factoring partner will also be responsible for credit-checking your customers. That gives you the advantage of having valuable intelligence about the creditworthiness of your clients, including new customers you may close. That can help improve the quality of accounts you take on, improve your credit decisions and advance your business’ debt security.

14. Less costs than equity investments – and you keep control

Equity investments and venture capital can be alternatives to traditional bank loans, but they can also demand much higher returns than the costs associated with factoring. In addition, you may be required to give up shares in your company, and that dilutes your ownership stake. It may even shift control of your business to the investors. But with factoring, there is no requirement to give up a stake in your business.

15. Protect against bad debt

In certain circumstances, some factoring companies offer non-recourse factoring, which means the factoring partner will take on the risk if any invoices are left unpaid. This type of factoring offers you additional protection against bad debt – a level of protection can be very important to some companies.

16. Improve your balance sheet

Invoice factoring is not the same as receiving a loan. On your books, a loan would get recorded as a “debit,” which is considered a liability. Instead, with invoice factoring there is no debt incurred. Your factoring partner is purchasing your accounts receivable with cash, and that reduces your balance sheet debt. The result will be a lower debt to equity ratio, and that can actually improve your financial position on the books.

Now that you’ve compared invoice factoring vs. bank loans, you might be ready for the next step. Turn your open invoices into working capital with Liquid Capital’s Invoice Factoring solution.

finance your business with Liquid Capital

Business booming? Here are 4 ways to finance your business for growth

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Do you have plans for expansion? Make sure you have funding lined up. But with so many options available, it can be difficult to pinpoint an option that makes sense for you. We share four ways to finance your business for growth. 

finance your business

 

When you’re planning for new hires, searching for a bigger office space, increasing your inventory or expanding your business in other ways, cash flow can be a significant  concern. Fortunately, there are many  financing options available for these types of situations. 

We’ve talked about other ways to finance a business, but in this post we’ll cover some more alternative funding methods:

1. SBA loans

SBA loans are small business loans partially guaranteed by the U.S. government, making them less of a risk for the lender you’re working with. Similarly, The Canada Small Business Financing Program offers loans to SMBs that are backed by the government. 

These loans come in a variety of amounts with APRs as low as 6.5%. They’re relatively harder to qualify for and you’ll need to meet the following requirements:

  • At least two years of business experience.
  • A credit score of 640 or higher. 
  • At least $100,000 in annual revenue.

However, government funding may slow the application process down so you should only apply for these loans if you can wait at least three weeks to receive the funding.

2. Business lines of credit

Sometimes, it’s hard to know how much money your small business needs to cover expenses, which is why some companies opt for a business line of credit. 

A business line of credit (LOC) is a revolving loan that gives SMBs access to a fixed amount of capital to meet short-term working capital requirements. Common examples of LOC uses include: 

  • Repairing business-critical equipment
  • Purchasing inventory
  • Bridging a periodic cash flow gap 

That way, you can borrow what you need without spending the entire line of credit.

3. Equipment finance and leasing 

finance your business - warehouse

Equipment finance and leasing is a loan designed specifically for companies wanting to purchase new equipment but don’t have the capital to make the investment. The lender lets you use the earnings generated from your new equipment to make monthly payments, cover additional overhead costs and contribute to your profits.

4. Purchase financing

If you have a good credit score, you can use purchase financing to fund a one-time business purchase. 

Purchase financing is a short-term funding solution that companies use when there’s an opportunity for immediate growth. They may also apply for purchase financing if they need to take advantage of a bulk-sale offered by a supplier or purchase inventory at reduced rates. 

Bottom line

Small business expansion is exciting. Once you see signs that indicate it’s time to grow your business, it’s important you prepare yourself for growing pains. 

One of the biggest challenges is how to facilitate growth and avoid unexpected problems that emerge when your business is expanding too fast. 

Another setback is the lack of funding to back-up your expansion plans. That’s why it’s crucial to explore different ways to finance your business — such as SBAs, LOCs, purchase financing or equipment financing — and select a funding option that will take your business to the next level. 

 

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Click here to learn more about our alternative funding solutions, such as invoice factoring.

Images by Adobe Stock and Pexels

increase your productivity

Keep an organized inbox and improve your productivity

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Feeling overwhelmed by your inbox? Falling behind with your to-do list? Being strategic with your email can improve your productivity and help you get more done.  

increase your productivity

This year has brought many changes to where we work and how we communicate with co-workers, clients and prospective clients. In the new virtual workplace, staying productive and connected with your team has become even more vital. But one thing that isn’t going away is email.

Prior to COVID, having an overloaded inbox and receiving countless unwanted messages every day was already a top concern. Now, email communication has become even more frequent and can pose a real roadblock for those trying to remain resilient in an uncertain market.

Fortunately, there are a variety of tools and strategies available to help busy professionals declutter their inboxes and get more done throughout the workday. With a clean inbox, you’ll spend less time checking emails and more time working on the things that really matter to you and your business. Ready to improve your productivity? Keep reading!

Check your email regularly — but on a schedule

When your inbox is full, it’s easy to avoid checking your email and dealing with the long list of messages you haven’t seen yet. On the other hand, the first step toward a better email experience is simply making this a regular part of your workday.

Try checking your email roughly three times each day — once in the morning, once at night and once during the day. Give yourself ten or fifteen minutes to respond to any urgent messages or any that you can reply to quickly.

Limiting yourself to a series of quick email sessions makes it easy to notice when unwanted content is taking time out of your busy schedule. It also allows you to turn off notifications and stop being preoccupied with emails throughout the rest of the day.

Mass unsubscribe

As mentioned above, one of the most frustrating parts of having a crowded email inbox is not being able to unsubscribe from all your newsletters at the same time. These messages cause unnecessary clutter and make it more difficult to access the content you’re actually interested in.

Luckily, there are now free and low-cost options available to facilitate mass unsubscribing. The Clean Email tool includes a feature that makes it easy to view all of your email subscriptions in one place and remove yourself from any newsletters you no longer want to receive.

Schedule in-depth replies

While you can typically manage to respond to most emails in a couple of ten to fifteen-minute sessions each day, some messages require a more thoughtful reply. Setting aside time to respond immediately will cut into your workday, so consider adding time to your weekly schedule just for long-form emails.

Two or three days each week should be enough to get to all outstanding emails without feeling overwhelmed. Take time at the beginning or end of these workdays to think carefully and write the perfect reply. Finishing this task all at once at a scheduled time will prevent it from interfering with the rest of your routine.

organized inbox

Set up filters and use folders to stay organized

Organizing incoming content by category is one of the best ways to make managing your inbox easier — and it’s easy to personalize this process based on your own unique needs. A number of inbox management tools provide features to automatically filter future emails, taking this tedious work out of your hands.

Start by designing your own rules for incoming emails, then apply them to future content. From there, you’ll be able to quickly scan each category without having to dig through unrelated or unwanted content.

Have a plan for each email

With these strategies in mind, you should be able to categorize each email as soon as it comes in. The longer you leave incoming messages without a response or filter, the harder it gets to come back to those messages later in the week.

Instead, group each email into one of three categories. First are the unimportant emails you can archive or delete immediately — this includes anything you don’t need to respond to right now (or ever). Next are those that you can manage with a quick reply, which you should always do immediately. Finally, the more in-depth messages mentioned earlier should be moved to a separate folder with a firm response deadline. This gives you a plan for each email as soon as you receive it.

Managing your inbox can be confusing and time-consuming, but cleaning up your email can be surprisingly simple. Just remember that having a strategy for managing emails will help to improve your productivity and is worth the investment. 

 Ready to take the next steps towards re-engaging your contacts in the new virtual world? Read these top tips.

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person. Learn more about the Liquid Capital Difference.

Bankers-Alternative-lenders

Bankers and alternative lending referral partners are a winning combination

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Working with alternative lending referral partners can have many long-term benefits for banks and their commercial customers. 

Bankers and alternative lending referral partners

As a commercial bank lender, you know that your referral network — and the relationships behind it — drives your success. With many banks making recent changes to their lending criteria you may have already noticed current customers and prospects coming to you with urgent funding needs — including requests that might not fit into the regular lending box.

With a strong network of lending partners, you’ll not only be able to maintain your bank’s book of business, but also fuel its growth.

As part of that network, aiming to develop referral connections with trusted alternative lending partners can have many benefits. If your prospective customers run into a challenge of not being able to meet your bank’s lending criteria, but are otherwise financially healthy, your alternative lending partner could be another option.

How can you get started building a referral network to help you build strong customer relationships? Keep reading for four ways you can lay the groundwork for long-term success:

1. Start the conversation internally

Many traditional banks may shy away from forming referral partnerships with alternative lenders because of bad experiences or news stories about deals gone wrong. If you’re a banker looking to branch out, it’s worth starting the conversation with your management team to see if they’d be open to the idea. Investigate whether there are any internal guidelines that prevent you from forming the relationships in the first place.

2. Make it easy to communicate

As a banker, you’re probably hidden behind a few layers of protection in the form of branch receptionists, telephone extension numbers and bank sub-brands. This can make it difficult for alternative lenders to reach out to you, whether it’s the first contact or even a regular email touchpoint. (Cue those corporate firewalls!)

Instead, make sure your alternative lender contact has your direct phone number wherever possible. Let them know when your information changes so they can stay in touch — especially if you move companies. This will help everyone proactively get in touch and then act decisively when opportunities are referred in either direction.

Bankers and alternative lending partners — Client success

3. Stay involved in the funding process

While your bank may not be directly funding your client’s current needs, staying involved in the funding process is beneficial to your clients. It ensures they’ll continue to feel supported by their bank and, at the same time, the alternative lender gets better visibility into the relationship.

That visibility also keeps your bank top-of-mind with the alternative lender because it’s a positive conversion for them. An ongoing dialogue and reciprocity between you and the alternative lender allow for a cohesive approach in providing the customer with the highest level of service.

4. Stay in touch — even beyond business!

This classic piece of relationship advice applies to bankers too: stay in touch with your referral partners even when you don’t have anyone to send their way. Checking in on your lending network during a slow period can spark future lending opportunities, but also engages them in ways that make them feel valued and not just another name on your list.

Send them a quick note with some useful information, reach out to congratulate them on a recent success, or use the time to find out more about the lender since they may have introduced new products in the time you’ve known them.

For today’s bankers, it’s all about developing relationships — with potential customers and referral partners. These partners, including alternative lenders such as Liquid Capital, can step in and provide funding when your customer doesn’t currently meet your bank’s criteria. With these tips, you’ll be able to create and sustain relationships with alternative lenders such as Liquid Capital and continue to increase your customer base.

If you’re a banking professional that’s interested in extending your network to offer additional and augmented funding solutions to your customers, learn more about the Liquid Capital Bank Alliance Program

invoice payment terms

Invoice payment terms: What are they and why are they important?

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Getting paid can be difficult for B2B businesses. Here’s what you need to know about invoice payment terms so you can maintain a consistent and healthy cash flow.

invoice payment terms

Fiscal needs vary from business to business. However, the need to get paid is consistent for every organization.

Invoice payment terms help ensure you get paid every time and on-time when you bill your clients. You can communicate when and how you expect to be paid for your product or service, indicate preferred payment methods and also outline policies for missed or late payments.

Why getting paid on time matters

Getting paid can be a challenge for many businesses in the B2B space. That’s because almost 63% of sales in the industry are made on credit.

This puts a lot of pressure on business owners and CFOs to come up with funding to run their business. That’s why they rely on invoice payment terms to create a predictable payment schedule that will allow them to calculate a precise cash flow.

Invoice payment terms are a crucial part of your billing as they can drastically reduce fiscal challenges and allow for better budgeting and financial forecasting.

What is the standard payment term on invoices?

Invoice payment terms indicate how you expect to get paid, and should include details such as:

  • the due date
  • accepted forms of payment (i.e. credit cards, check, electronic transfer, etc)
  • the preferred currency you deal in (when working with international clients)
  • charges for late-payment or missed-payment

You can customize payment terms based on the industry you operate in, and how your business is set up. However, here are 12 commonly used invoice payment term examples:

 

Invoice payment terms

Definition
Net 7 Payment is due seven days from the invoice date.
Net 21 Payment is due 21 days from the invoice date.
Net 30/60/90 Payment is due 30, 60 or 90 days from the invoice date.

Longer payment terms are common within certain industries. If customers require longer terms, the company could consider utilizing invoice factoring (see below) to accelerate needed cash flow into their business.
Upon Receipt Payment should be made immediately when the client receives the invoice.
PIA Payment in advance — the client must pay a certain amount upfront, before receiving the product/service. This can be a deposit or down payment.
COD Cash on delivery — also called “payable on receipt” is when clients are expected to pay at the time of product/service delivery.
Contra If your customer is also someone you do business with, you can use a contra invoice. A contra term offsets a sales invoice against a purchase invoice, or when a purchase invoice becomes a payment.
EOM Payment is due at the end of the month when the invoice is received.
CIA Cash in advance — the client must pay the full amount on the invoice before receiving a product or service.
15 MFI Payment must be made on the 15th of the following month of receiving the invoice. MFI means “month following invoice”.
2/10 Net 30 If a client is billed a Net 30 invoice, and they pay their balance in full within 10 days, they get a discount of two percent.
Interest Invoice Charge to clients for making a late payment or failing to make a payment.

Businesses apply this term if they want to encourage customers to make a one-time payment by the due date and to recover costs from an interruption in the payment schedule.

 

Invoice factoring is an alternative funding solution that allows you to sell an unpaid invoice to a third-party factoring company for a slight discount. Businesses that have to wait for one, two or three months to get paid often sell account receivables to inject and maintain cash flow. The business will get immediate working capital, not having to wait for the client to pay the invoice, and they will not incur any debt.

Using invoice terms to your advantage

Without proper invoice terms, your customers might fail to remember—or intentionally delay— paying you.

Choosing the right terms will not only protect you from payment negligence but can also make your clients take you seriously. Here are some best practices to remember when you’re setting up your terms or revamping your billing process:

  • Make sure the invoice is clear and easy to understand by the recipient. Using the standard invoice terms mentioned above will help you make it clear on your bill as to how your customers should pay you.
  • Your customers are business owners too, so be realistic and flexible about your terms and conditions.
  • Discuss late fees with your customers and come to a mutual understanding of what is acceptable and what’s not.
  • And lastly, don’t forget to thank your customers for their business!

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person. Learn more about the Liquid Capital Difference.

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Cash flow tips from top-performing CFOs

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Every CFO knows that cash is king! So give your company’s coffers the royal treatment with these top cash flow tips.

Cash flow tips for CFOs

Your cash flow forecast will be the life force of your future business strategy. And as your company grows, you’re likely taking on more debt or wracking up expenses—making it more challenging to get additional financing.

Don’t get backed into a cash flow corner. Here are some great cash flow tips from five CFOs that have been there before and their advice on cash flow management.

1. Prepare cash flow projections

Jonathan Gass – Founder & CEO – Nomad Financial

“A well-run business should build a 13-week cash flow forecast that takes into account the exact week in which a payment is expected to be either received or sent out. It gives management the ability to understand their cash needs over the next quarter and make smart decisions about how to manage their working capital and when to make active decisions to stretch it out.”

2. Manage cash flow with separate accounts

Jody Grunden – CFO – Summit CPA Group

“Most small businesses manage cash flow by looking at one master bank account. With just one account, it can be hard to stow money away for taxes or for other projected expenses. It can also be hard to understand the health of your cash flow on a regular basis. What I’ve found to work well is to have three separate accounts, each with a different purpose.”

Gain better control over your cash flow by using an operating cash account for everyday expenses, a cash reserve account for emergencies and a tax reserve account to ensure you have enough money to pay the taxman at the end of the year.

 

3. Allocate resources strategically

Brad Halverson, CFO of Caterpillar

“An important responsibility of a CFO is resource allocation — where the company is investing its time and money. To do this well, the CFO needs to first get their hands dirty in the field by gaining an understanding of where and how the company is positioned to compete for business by adding value to customers.”

4. Benchmark operations

Ken Goldman, CFO of Yahoo

“For a number of years, we benchmarked best practices. By tapping into both internal and external knowledge, we were able to better map accounting and transactional functions and measure their competitiveness and effectiveness across operations. Benchmarking every operation allowed us to compare and analyze so we could align our structure over time.”

5. Improve cash flow management

Eliana Salazar – CFO of AWE

“These four steps will help you improve your cash flow: ask for the longest payment terms possible, monitor the account receivables, consider alternative terms of financing, and constant negotiations with your suppliers and contractors.”

Bonus cash flow tip:

Know how to communicate the numbers

Carol Tomé, former CFO of Home Depot

«It’s one thing to know your numbers, but it’s another to make sure your teams, including fellow C-levels, the Board and investors, pay attention to the right ones.

During my first presentation to investors as Home Depot’s CFO, an investor on the front row fell asleep. He wasn’t fighting nodding off… he didn’t close his eyes for just a second… he didn’t have a glazed look in his eyes. He fell asleep and fell off his chair.

After that, I understood immediately that you can know the numbers and the strategies behind them better than anyone, but if you can’t communicate well and tell your company’s story in a way that engages the investor and analyst community, you are toast.

I vowed from that moment on to become a master of connecting with my audience, and it’s something I push my direct reports to do as well.»

 

Up Next: Ready to put these cash flow tips into action? Use these 7 proven cash flow tactics to manage your cash flow.

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

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Re-engage your contacts in the new virtual world

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Now is the perfect time to re-engage your contacts and develop new ones!

Re-engage-your-contracts

Due to the global pandemic, a new virtual world has developed, growing organically from the need for social distancing and remote work. However, we have also had to put a temporary hold on most traditional networking events, in-person meetings and even simple coffee get-togethers. 

Whether or not you’re a fan of networking, this has led to many business professionals becoming disengaged from their professional contacts. But this can be a critical—and avoidable—business error.

While we aren’t able to easily connect in-person, how can you keep in touch with your professional contacts? Here are three tips to get you started:

1. Get active on social

The key to being successful at virtual networking is to focus on the platforms where your contacts are most active and make those your priority. But don’t make the mistake of spreading yourself too thin. To follow an effective plan, the key is quality over quantity.

If you don’t already have a premium LinkedIn account, now’s the time to make the investment. LinkedIn premium accounts are offered at four tiers, so you can select one that fits your needs and budget. There are often 30-day free trials available if you’re still unsure about committing to a monthly subscription. If you have included other digital platforms (such as Twitter or message boards) in your virtual networking plan, look into upgrading your account to a premium subscription as well.

2. Participate in virtual networking events

Keep your ear to the ground for the opportunity to participate in virtual networking events such as virtual coffee chats or meetups, industry-specific webinars and online training or workshops. 

Can’t find any that meet your networking needs? Then start your own! Reach out to your close network and offer to organize a virtual networking event. Then encourage your contacts to invite two to three of their contacts to the event to help bring fresh ideas and faces to the event.

3. Don’t cancel your booked conferences

It may be tempting to cancel any in-person conferences you had booked, especially with current travel restrictions in place. But hold onto those conference tickets! With many conferences moving to a virtual model, you may miss out on a great opportunity to access valuable information and knowledge that you can share with your network.

Many virtual conferences are also providing on-demand content, which allows you to access panels, seminars and keynote speakers’ when you want. With this increase in flexibility for accessing conference content, you may even find it easier than ever before to share what you’ve learned with your network.

Up Next: Ready to create a virtual networking strategy that allows you to re-engage your contacts? Get started with our four-step process.

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

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How an «attitude of gratitude» can be your brightest company asset

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Gratitude matters when running a business, both for your mental health and for the health of your organization.

Gratitude-leads-to-business-success

In late 2019, people sat down to make their New Years’ resolutions for the coming year. Many decided to be more grateful in their daily life.

On the resolutions lists for 2020, some suggested to “repeat an affirmation related to gratitude in the morning” or to simply “look on the bright side” — or the very vague suggestion to “be good, be kind, be better.” While relatively simple to execute in theory, could it really be that simple in reality?

Little did anyone know how the world would soon be disrupted by the looming coronavirus pandemic—making gratitude more important, and even surprisingly more challenging, than ever before.

The wisdom of being grateful

You may be surprised that insights from ancient Greek thinkers could resonate with modern CEOs and business leaders, but the importance of gratitude is timeless.

The Greek philosopher Epictetus tells us, “He is a wise man who does not grieve for the things which he has not, but rejoices for those which he has.” Of course, Epictetus must have meant “wise human,” as 36% of US businesses are women-owned!

Modern psychology research supports these insights, too. In studies at leading universities, participants who focused on gratitude felt more optimistic about their lives and even visited the doctor less frequently.

Gratitude forces us to think about the “now” instead of the past and future. This means our minds become free to focus on what we can control, instead of lingering on regret or anxiety.

Sigh… Why do we focus on the negative?

Wanting to be grateful is easy, but remembering to be grateful is hard. When business and life get chaotic, counting your blessings is probably the last thing on your to-do list.

The human brain tends to focus on the negative. One example of this is “loss aversion theory,” or the idea that people care more about losses than wins. Experiments have shown that people get more upset about losing something than gaining something new.

The key to gratitude is overcoming the natural “survival instinct” that causes us to fear failure and instead learn to think slowly and deliberately.

Nobel Prize-winning economist Daniel Kahneman describes two psychological systems in his book, Thinking Fast and Slow. “System 1” is our unconscious survival mode, while “System 2” is analytical, reasoned thinking.

Business leaders know the importance of having a strategic mindset—in fact, long-term planning is key to being an entrepreneur. When facing problems in your business, leaning into gratitude and “System 2” thinking can help you make the right decisions in the long term, rather than succumbing to fear and negativity.

Try these easy gratitude exercises

So, how can you remind yourself to be more grateful on a daily basis?

One way is by starting a gratitude journal. This doesn’t have to be complicated—it’s enough to just get a notebook and jot down two to three things you’re grateful for each day. Don’t worry about repeating things or using perfect spelling.

You could also incorporate more reflection time into your daily routine. This could mean taking 10 minutes to meditate in the morning or taking a short walk at lunchtime.

The most important thing is to be consistent and make sure the new changes stick.

Becoming a grateful leader

Learning to be more grateful isn’t just helpful in your own life. It can also help you inspire others in your company.

According to the Academy of Management Insights, creating a positive “culture of gratitude” in your business can help reduce turnover and improve employee morale. There are other business benefits, too. A report from the Global Happiness Council tells us “a meaningful increase in well-being” yields on average a 10% increase in productivity.

Business leaders and entrepreneurs can encourage gratitude in a variety of ways. Forbes contributor Karlyn Borysenko has shared some stories of how small business owners have built a culture of gratitude including Indira Hodzic, owner of IMAGE MedSpa, who makes a point to share positive affirmations and quotes with her employees. Likewise, human resources consultant Rebecca Mazin encourages clients to write notes thanking employees for specific actions.

Gratitude means appreciating everyone’s contribution, celebrating even the small wins, and giving praise where it is due. It also means giving suppliers, colleagues and customers the benefit of the doubt—even when the going gets tough.

Up next: Building resilience as a business leader allows you to overcome unforeseen obstacles with ease. Learn how this soft skill is every successful leader’s secret weapon.

When business challenges seem overwhelming, access to working capital can help. For more information about business funding options, reach out and we can discuss your situation.