Why Invoice Factoring is Important in Food Distribution
- Author Michael Sutanto
- Published May 1, 2013
- Word count 599
Invoice factoring, which is also known as accounts receivable financing, is an important part of many different industries, including the food distribution industry. In the world of food distribution (just as it is in most other industries), cash flow is a serious problem that in its extreme cases, can even sink a company. In other cases it can prevent expansion and growth, which is not a good situation to be in either.
Here are 3 reasons invoice factoring is an important service to have in the food distribution industry:
It helps fight back against the rising cost of fuel. It's pretty much guaranteed that you will have to raise your rates frequently as the cost of fuel goes up, but when do while you are waiting for those new rates to take effect? You need to announce the rate increase and then wait a short time, but your business can't afford to wait. This is where invoice factoring comes in to fill in those gaps. By leveraging the power of the invoices you have out that have not been paid yet, you make it possible to continue paying your fuel bill until those new rates kick in.
You receive the flexibility to extend payment times for your vendors. Sometimes in order to get a higher price for the goods you are distributing, it may necessary to extend your vendors' payment times. There is a growing demand for extensions, but if you do not have the line of credit offered by invoice factoring, then you will be unable to offer this service. Then you will be cheating yourself out of a high volume of income because you can't extend payment times in return for higher payments on the back end.
New distributors who are still growing will have to deal with lower profit margins as they begin to prove themselves to their customers. This makes working from check to check a reality, but it certainly isn't a good reality. What can you do if you get offered a major contract and then aren't able to fulfill it because you don't have the cash to do so? You will be missing out on an important opportunity to expand and grow your business if you don't have the financial advantage of invoice factoring to help you out.
GTA Fruits is a distributor of tropical fruits that works closely with numerous major grocery store chains. By managing and financing GTA's accounts receivables, the company has been able to grow rapidly, enjoying not just growth but also a greater need for cash flow, which is growing exponentially.
Financing for the Food Distribution Industry
Invoice factoring has worked in numerous different industries. Invoice to Cash, also known as ITC, actually specializes in helping small to medium sized business grow as they leverage those unpaid invoices. Low risk small business financing options include:
Cash right in the moment you need it, whether it's to fund the next contract, enable vendors to pay higher prices to you later, expand the business, or just pay your bills.
Accounts receivable administration will improve your cash flow by placing someone in charge of managing it more efficiently. Collection becomes a breeze as well when you take steps to improve the workflow of this project.
A transportation management system enhances your ability to serve your customers, thus raising your bottom line.
By combining these three services, you are sure to discover the growth that has been just around the corner for so long. Leverage your invoice so you have the cash to fill the next big order.
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