Business can also fund their daily operations through their receivables. This is part of business assets. They are also money from accounts to be paid for payment.
When receivables are not managed properly (for example, they are not paid on time), businesses can expect negative cash flows and debt to increase. In general, accounts receivable is quite complicated to be managed, especially for small companies that are not ready to assert themselves to get what basically belongs to them. Most of these businesses don’t really know how to make customers pay without deciding bonding or scaring them.
To avoid this kind of problem, it is important to manage receivables wisely and to free the capital trapped in trade accounts. There are various payment schemes to be seen, such as billing progress. This scheme involves a down payment of up to 50 percent of the contract price and this must be paid after signing a service agreement. After that, 20 percent must be paid after certain services are sent. Finally, the remaining 30 percent is provided after full service is sent.
Other popular schemes are financial receivables. This is a setting offered by many trusted banks to clients with business. This is a very strategic approach to managing accounts receivable to protect business operations. This type of financing offers the following benefits for business owners:
Better cash flows and enhanced forecasting. This means there is no more scrambling for the funds needed for the operation or stop business activities due to lack of funds. If your business is eligible for this financial solution, you can access up to 90 percent of the invoice value shortly after being released.
Maintenance of good business relationships. Business connections can be easily destroyed when debt is not respected according to schedule. With financial receivables, payments to suppliers can be done on schedule and this is achieved easier. In addition, timely production or delivery of services can be maintained effectively. This, in turn, helps uphold the image and a good reputation from the company to his client.
In the case of default, lenders (or banks) have the right to collect accounts receivable directly from identified business debtors. Business can operate as usual and do what they do to grow and produce more income.