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One of the major problems that all businesses, irrespective of their type, market, service, dominance and position of the market or size will face at sometime or another, is the potentially devastating and crippling impact that a limited cash flow can have on the business as a whole. When a business suffers from restricted cash flow, this makes it much more difficult for them to satisfy their own creditors and the debts that they owe to these creditors. In order to do so, the business will be required to use the working capital reserves that it owns to remedy this situation.
Unfortunately, working capital reserves are by no means infinite and so the company may find itself in the dangerous position of having exhausted its working capital reserves before any revenue or income has been received from its customers. What this means is that while the company itself is still owed money, it also owes money and so the people it owes money to may decide that they are not comfortable or happy with waiting around for the payment...and so may impose pressure.
This can take the form of a supplier who refuses to provide additional stock until payment is received, or in the guise of a creditor that decides to initiate litigation proceedings for the recovery of the debt. In short, poor cash flow directly influences the solvency of a business and as such then, should be carefully monitored and controlled.
One of the best ways to inoculate against the risks of cash flow and the dangers that it will bring to the business owner is to make use of factoring accounts. By factoring accounts, the business owner will receive a substantial amount of money which is directly proportionate to and determined by the net value of the invoices that it owns and which have money owed on them.
One of the most commendable features of factoring accounts is that they are truly democratic and universal, and the reason for this is that the credit rating of the business will not affect their eligibility to these. Specifically, the business owner will benefit from this as it means that they will not have to contend with the delay that the processing of red tape will inevitably bring for them as the factoring agency is left to audit their creditworthiness.
Therefore, factoring accounts is possible and accessible to a company that has underwent or is currently undergoing, the bankruptcy proceeding.
Furthermore the business owner will also benefit from the fact that the factoring agency will be assuming responsibility for the checking of the credit checking of the customers themselves. In addition the factoring agency will be passing on this information to the client company who will then have a better idea as to how much bad debt (debt that they will not be able to recover the money owed on)that they are currently facing.
Factoring accounts is a competitive market with plenty of providers, and this in turn directly equates into cheaper fees
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