Invoice factoring vs. bank loans

Invoice factoring vs. bank loans: Which lending option is better for your business?

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When looking at the various funding options, you may review invoice factoring vs. bank loans. Here is a quick and handy comparison.

Invoice factoring vs. bank loans

If your business needs working capital, you will likely research both invoice factoring and bank loans as possible funding options. 

But how do you know which one is the better option?

Every business scenario is unique. And while there may be multiple factors that may impact your decision, there are two important elements to consider — how quickly you need the funds and the borrowing costs associated with your choice. 

Invoice factoring and bank loans have little in common, other than both providing cash to businesses. We’ve put together a simple breakdown of the two borrowing options to help you decide which one works best for your business:

First, what is invoice factoring? 

Invoice factoring is a funding method that gives your business access to immediate cash by selling your invoices to a third party at a slight discount — with considerable advantages. (More on that in a bit.) 

Let’s say you’re expecting a customer to pay a $10,000 invoice next month. If you need that money today, you can sell that invoice to a factoring partner and receive slightly less than the totalling amount on the bill — right away.

So invoice factoring isn’t the same as borrowing money. Instead, you’re selling an asset (your accounts receivables). You don’t owe the lender any money so there’s no debt added to your business.  

When bank loans make sense

When you borrow money from a bank, it’s usually in the form of a traditional loan or line of credit. With this type of borrowing, you pay the principal plus interest until the loan is repaid in full. It’s the same as a personal loan, and is relatively straightforward.

While these conventional loans are pretty cut and dry, they add more debt to your business. For that reason, they can cost more in the long run — and you may not be able to close the cash flow gap when you really need it. Approval may also take long, and you’ll also be adding another liability to your business.

Here’s a quick breakdown of invoice factoring vs. bank loans:

 

Invoice Factoring Bank Loans
Approved in a few days. Approval process is lengthy.
No collateral is required. Need some collateral.
Interest rate is lower. Interest rates vary depending on bank and type of borrowing. 
Only your clients’ credit history is assessed. (Good for companies who do not have as strong a credit rating, or limited credit history.) Business needs an established credit history.
No debt incurred with advances on invoices. Line of credit is added as debt to the business.
Financial flexibility and immediate access to cash flow. Upfront payment is required on uncertain future earnings.
Additional services can often be offered at no cost. No additional services offered.

What’s the best financing option for your business?

It’s clear there are many advantages with invoice factoring.

With factoring, you’re selling a valuable asset to gain more funding, not incurring any debt. You also get to choose which invoices you want to factor depending on how often you need to inject cash flow into your business. Unlike a bank loan, you’re not tied into a long-term contract and you can make the most of your invoice terms, taking advantage of the flexibility that factoring offers. 

When you compare factoring with traditional funding, you may realize that bank loans are sometimes less advantageous in the long term. You could end up paying more for the access to that capital than you would with factoring, and will be adding on liability on your company’s balance sheet. 

 

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.

Holiday Gift Guide 2020

Holiday gift guide 2020: Thoughtful presents for colleagues & clients

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We’ve compiled a holiday gift guide with ideas from creative businesses, so you can feel good while surprising your employees and clients! 

holiday gift guide 2020

This year, a lot of things changed for us — how we work, shop, travel and socialize with others. So it’s no surprise that we’ll be celebrating the holidays differently, too. 

Although there likely won’t be a traditional holiday party at work, you can still spread some cheer by sending gifts to your employees, coworkers and clients to show your support and appreciation. (And don’t forget the possibility of a Zoom party!)

In this holiday gift guide, we highlight some products and services you can customize with a company logo and brand colors. You can also use this guide as a starting point to find more personal gifts for the recipients – as long as it’s fun and shows that you’re thinking of them!

Useful tech for the WFH team 

GIF work from home

Let’s face it, working from home can get a little mundane. (We thought these fun gifs could paint a fun picture!) So who wouldn’t love some cool gadgets to brighten the day?

There are many accessories that you can make a home office setup more enjoyable and productive. If you also have any parents on your team, consider giving tech that can make it easier to juggle kids and work (and help them keep some of their sanity!).

While Amazon has some very affordable and quick delivery options, you can also choose something more unique from this Wired list. 

Featured gift ideas:


Experiences 

GIF kardashian new hobby

Yes, Netflix and guilty-pleasure TV has been a major hobby for many this year. But for most of 2020, we’ve all been stuck indoors without the usual entertainment. So this year, why not give a fun experience to your colleagues or clients? 

With this idea, you’re actually giving them two gifts in one: the experience is unique as it is, but they also get to make memories — so that’s something exciting they’ll never forget. Either way, they’ll have you to thank for the quality time they spent honing in on a particular skill, exploring new hobbies or spending time with their loved ones. 

Here’s a catalog that showcases some great finds. 

Featured gift ideas:


A wine subscription

GIF wine pouring in glass

Do you miss grabbing an adult beverage after work with your colleagues? Or the happy hour your company hosted that gave everyone a chance to relax and have fun?

Wrapping up a busy workday with a glass of wine may be the way some coworkers like to unwind.  And next year, the equivalent of the after-work outing can take the form of virtual meetups where you can supply the wine through a gift subscription to colleagues. There are also subscriptions available with non-alcoholic options so those who don’t drink can still join in. Plus there’s the bonus of team bonding!

This article rounds up some great and affordable wine subscription services that you can choose from.

Featured gift ideas:


Match a donation 

GIF donate sign

The holidays are all about generosity and community. And there are so many people and organizations that can benefit from charity this year. Why not initiate a match for a donation request? For example, you can ask recipients to choose a local charity and you can match their gift. 

You can also encourage them to give to front line workers, food banks or contribute to your companies charitable organization (if you have one!). 


Have fun while spreading some holiday cheer

Just like you, everyone in your company will have a very different experience this holiday season. And with remote work, it can be hard to feel connected to your employees, coworkers and clients. Make this season a bit more memorable by sending gifts that add a bit of fun and excitement! 

 

Up Next: When is a good time to expand your small business?

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.

CFO-tips-for-cash-flow

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.

Re-engage-your-contracts

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.

4 cash flow crisis management tips to avoid economic icebergs

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Avoid becoming the next Titanic-sized failure and gain control of your business finances with these cash flow crisis management tips.

cash flow crisis management

When the Titanic sank in April 1912, there were a variety of factors that caused one of the worst maritime disasters in history. Experts agree that it was a combination of human error and natural forces that led to the historical sinking. The ship was going too fast, the crew dismissed a critical iceberg warning (and then made a fatal wrong turn), key costs were cut that sacrificed safety and there was a lack of equipment including binoculars and lifeboats.

If you’re running a company during the recent pandemic, there are some important lessons to be learned from the history of the Titanic. The financial impact of economic downturns can be significant when sales start slowing down, contracts are delayed, supply chains are disrupted, customers can be lost and, ultimately, cash flow is affected.

To survive, many businesses will need to leverage cash flow crisis management strategies. Though you may not always be able to avoid the ‘icebergs’ ahead, you can plan and respond to changing market conditions proactively to minimize the impact on your business — and avoid disaster. 

Here are four cash flow crisis management tips that can help you minimize the impact of economic downturns on your business:

1. Update your cash flow forecasts

“Cash is king.” Considering that the cash cycle for many businesses is 90 days, it is essential to have a good understanding of your sales cycle in terms of lead times, purchase of raw materials and production of goods and services. Sales forecasting helps business owners understand where cash is going (and coming) from. It can also help you to establish a strong slush fund in case of slow periods of growth.

Thinking about the future of your business is critical to success. However, as the business grows, it can become harder to get additional financing due to the debt that the business has to take on. Evaluating your burn rate and runway, your marketing programs and expenses can help you make necessary adjustments to your cash flow forecasts.

2. Follow up on outstanding accounts receivable

In periods of economic downturn, it is important to get on top of your accounts receivable and make sure that you are getting paid on time. By carefully auditing your accounts receivable, you can achieve better financial flexibility to avoid economic icebergs in the waters.

Once you have a firm understanding of what accounts are outstanding, it’s time to follow up with those accounts and have them settle their invoices. It may also be worth considering and balancing the risks and rewards of adjusting your terms of payment.

Want to learn more about savvy bookkeeping tips for small businesses? Click here.

3. Review and adjust expenses

To achieve greater business resilience, it’s important to understand all of the liabilities for your business and to have a plan to reduce them. Evaluating what your fixed and variable costs are is a good way to start cutting costs.

Looking for areas of flexibility on your payroll, cutting redundant line items and considering time management strategies or tools are just a few ways that you can adjust your expenses and increase profitability.  

 

cash flow crisis management

4. Consider alternative financing options

Keep an eye on future planning and strategizing. As your business grows quickly or financial circumstances change, you can run into challenges getting additional financing through traditional funding options. 

Leveraging the power of alternative financing options such as Invoice Factoring, Asset-based Lending or PO Financing could be the life preserver your business needs. Alternative funding can also help to increase flexibility and long-term success while complementing your current traditional funding arrangements.

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.

Cut business expenses & improve profitability — Get these 6 tips!

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Be strategic when setting out to cut business expenses and you can fuel business continuity.

Cut business expenses

A penny saved is a penny earned…it’s a saying that’s all too familiar to most entrepreneurs. (After all, all those pennies can add up to some big dollar amounts.) It’s also an extremely useful piece of advice when managing your cash flow and trying to outlast or prepare for an economic downturn. 

Knowing what costs and when to cut is a balancing act that, if not properly executed, can put your business in jeopardy. However, when done correctly, it could help set you up for business success.

Goodbye emotions, hello strategy. Cut business expenses with clarity.

When making budget cuts —  big or small — be careful not to act on emotion or jump too quickly. Instead, take a strategic and analytical approach to deciding which line items can be adjusted or deleted completely.

So dust off your calculator, sharpen your pencils and pull out your company’s financials. Here are six areas that you should look at when starting to cut business expenses.

1. Cash flow: future and present

Creating a plan for where you think your business will go is crucial to future success. It helps you to understand where the business is going so you can future-proof it against economic uncertainties. But you can’t know where you’re going if you don’t know where you are starting from now. So the first step is to calculate your current cash flow and identify areas of improvement.

Start with part 1 of our cash conversion cycle blog series.

2. Audit both variable and fixed expenses

Once you understand how cash is flowing through your company, you can look at adjusting the speed at which it leaves your coffers. 

You may be surprised to find that expenses once considered fixed, are now variable, and can be reduced or cut. For instance, with the recent shift many companies have made to remote work, you may find that you can downsize or make a transition to a partial or fully remote workspace. 

When looking at cutting your variable expenses, think outside of the box (even the smallest line items can add up). Office supplies that you regularly ordered may no longer be needed when your workforce is at home. Speak with vendors to take advantage of discounts and adjust your delivery schedules where applicable. Improving relationships with suppliers combined with better inventory and supply chain management can reduce expenses.

3. Industry benchmarks

Measure your performance against industry standards, which will help you better understand how your business is doing in comparison to the averages. Once you know how you stack up, you can take action to separate your business from the competition and increase profits. This will also help you create target goals for the next quarter or year. Make sure to share those with the entire team, so they know what they need to collectively achieve.

Cut business expenses & improve profitability

4. Implement time management strategies and tools

Time is money, so make sure you and your employees are making the most of the workday. Using apps like Focus Booster or Rescue Time can keep your team on task and focused on results. It’s also important to set expectations within your organization for how long certain tasks should take so everyone is clear on how their time should be spent. 

5. New technology investments

Constant investments in new technology can yield long-term improvements along with more efficiencies across the business — and reduce costs over time. Focus on maximizing ROI when building your tech stack. 

Is that new project management software going to speed up your team’s workflow and will they use it? Would better accounting software spot costly errors and pay for itself? Would AI improve your inventory management, or should you invest in other areas with a more immediate return? Carefully select tech investments based on your business goals — and watch out for tech trends that are just a flash in the pan. When you need to cut business expenses, don’t be the guinea pig.

6.  Employee incentives to cut business expenses

Creating loyalty amongst your staff and offering creative ways to reduce waste can go a long way. Listening to your employees can give you further insight into areas that could be cut or reduced. It may even spark some creative solutions that you wouldn’t have necessarily thought of alone. Set up a brainstorming session or survey as a starting point, and you may even want to delegate a team to find efficiencies and cost savings. By rewarding them for their efforts, everyone wins!

About Liquid Capital

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.

 

Ready to cut business expenses today? Here are 5 more practical tips to spend money wisely. 

Bankers wear capes, too! How funding superheroes work together

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Alternative and traditional funding solutions unite to make the perfect financing team — working together to help clients at the bank and beyond!

Want to provide the ultimate level of customer service to your customers and potentials? It’s time to dust off your cape and join forces — Avengers style. 

The Avengers all had similar goals, but very different approaches, to saving the day. Yet, when they united for a common goal (like preventing a supervillain from world domination), they were unstoppable. 

The same goes for banks and alternative funding partners. Together, these forces are able to provide powerful funding solutions for customers of all types.

If you are a banker who specializes in helping businesses secure financing, then you know the incredible importance of creating and maintaining strong customer relationships. However, your meticulously cultivated relationship could be in jeopardy if your customer doesn’t qualify for a traditional loan. By working with an alternative funding partner, you can stop saying no and start saying yes!

Time to save the day

When a customer (or potential customer) comes to you for help, reassure them that you’ll do everything in your power to accommodate their needs. They came to you looking for a solution to their problem and although your bank may not be able to help, you can always offer them alternative lending options, working with a partner who understands the role you each play.

Keep villains at bay

If you aren’t familiar with all the options available to your customer, you leave them vulnerable to potential evil-doers. Not all ‘lenders’ are created equal. There are some who might entice business owners with promises of low rates and false credibility — but your client may not realize there are caveats including contractual constraints and hidden costs. 

Your reputation is on the line, so it’s crucial to feel confident with the referral partners your work alongside. Get to know their solutions and processes so that you can develop a high level of trust in advance.

Want an easy resource to explain invoice factoring to your client? Download this eBook and feel free to share. Invoice Factoring Guide.

Put competition aside for the greater good

It’s easy to think that bankers and alternative lenders are competitors (after all, both provide funding to businesses in need). However, as with superheroes, both want the best for their clients — and to ultimately satisfy their needs to grow their business. 

As a banker, having a trusted preferred alternative lending partner can greatly alleviate the stresses of not being able to traditionally accommodate a client. Often, clients don’t know which solutions best suit their business, so they’ll trust you to guide them. By leaning on the expertise of a lending partner who can, in turn, give you accurate advice quickly, it can help to secure prospects and retain clients.

Outline a bridging program – Avengers style

Every superhero has their strengths and weaknesses, but when they band together, they become an unstoppable force. Creating a program that bridges the gap can also help you to gain higher market shares and enhance your bank’s overall image. 

In the case that a prospect is desirable, but their financial status or length of time in business disqualifies them for traditional lending, creating a bridging program can go a long way to securing them as a future customer. 

Your alternative funding partner can also assist the bank in picking up the deposits and some of the ancillary services to start working with the client. As they become qualified for bank financing, they could transition into traditional commercial lending. 

In the instance of a current customer, they might be maximized on their line of credit. Alternative lenders can step in to fill the gap for as long as the client needs it. The lender can extract themselves when you say they can now be accommodated with traditional lending.

Alternative and traditional funding solutions unite

Teaming up with those who have your client’s interest at heart, provides you with more resources to save the day.

Depending on the industry, or the economic landscape, there may be a slower ramp-up to when a client is ready for traditional banking. But now, not only have you provided your clients with reassurance and a trusted ready solution for the present, but you have also created a roadmap for their future business growth, getting them where they need to be for traditional banking.

Do you have a client that hasn’t met all the criteria for lending? Send them this quick guide so they know what steps to take next.

Now if that’s not a hero, who knows what is?

With the Liquid Capital Bank Alliance Program, we help banks grow their market share and strengthen client relationships. Learn more about how this exclusive program can work for you and your customers here.

About Liquid Capital

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.