For small business owners, the fear of bad debt can be a major concern. After all, if you don’t get paid for your services or products, it could spell disaster for your bottom line. Fortunately, invoice factoring is an excellent tool that can help protect your company from taking on bad debt and even improve cash flow in the process. Invoice factoring involves selling unpaid customer invoices to a third-party lender at a discount in exchange for immediate payment.

Understanding the Basics of Invoice Factoring

First, it’s important to understand the basics of invoice factoring. When you factor invoices, you receive an advance payment for your unpaid customer invoices. This means that instead of waiting 30, 60 or even 90 days or more for customers to pay their bills, you can get paid right away. The lender will then collect payments directly from your customers, allowing you to focus on running your business instead of chasing down overdue payments.

Research Factoring Services

Next, when using invoice factoring to protect yourself from bad debt, it’s important to make sure the company you are working with is reputable and honest. Research online reviews and compare rates and fees between lenders before making a decision. Additionally, it’s important to consider the creditworthiness of your customers. The more reliable and financially sound they are, the less risk you will have with invoice factoring.

Establish Clear Payment Terms

Finally, it’s a good idea to set up clear terms of payment with your customers. This will minimize the chances that they will default on their payments and leave you carrying the cost. Clearly stating payment due dates and outlining any late fees or penalties can help ensure that your invoices stay current and improve your chances of avoiding bad debt.

By understanding how to use invoice factoring properly, small business owners can protect themselves from taking on bad debt while maximizing profits in the process. Contact Artis Commercial Capital today to start factoring your invoices.