Canadian business owners and financial managers who have chosen a/r financing as a cash flow strategy need to understand where they can go wrong, and take that other path! You do that by making the right business finance decisions in three areas - understanding how accounts receivable pricing works, ensuring you have the best facility in place , and finally, by default , feeling confident you have picked the best business factoring partner .
Let's dig in therefore! There is no business financing that is more misunderstood that A/R factoring. And it's actually not hard to get the basics under your belt. The concept of time and cost is critical in factor pricing. When you sell your receivables and receive cash the same day you understand of course that the longer that receivable is uncollected... well your financing costs are going up.
We recommend C I D as the most preferred type of accounts receivable financing. It's the most logical Canadian solution, or the ' right way ‘. C I D is ' confidential invoice discounting ' - it's your version of ' mind your own business'! Under confidential invoice discounting you bill and collect your own receivables. Unlike your competitors who use this type of financing - where their clients are put on notice that your competitor has chose to finance their receivables via a non bank solution. But, remember of course that in business factoring never has ' time means money ' been so important, so even though you are billing and collecting your own receivables focus on operational collection policies that allow you to maximize cash flow and lower financing costs .
The ' right way ' around this type of business financing should focus on picking your best partner firm that suits your overall needs. The facility you pick, and the partner that finances it for your company will make or break your success in this type of Canadian business finance.
The landscape in Canada is littered with many firms who are non Canadian, charge too much, disguise their inherent financing fee with all sorts of small administrative charges that add up, and finally, as we noted, insist that they are between you and your customer with respect to collections.
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