In the United States, roughly 26 percent of all invoices become delinquent or simply go unpaid. For businesses, unpaid invoices no only cause a strain on finances but recouping that revenue from unsettled customer accounts involves a lot of work.
As a rule, unless a business operates with a point-of-sale system, invoices are issued with a standard payment schedule of 30 days or longer. Since most customers manage multiple bills and invoices, the staggered payment schedule allows for good accounting without draining the coffers all at once. Typically, customers view this as money owed for services and goods. What few realize is that the longer a business has to wait on unpaid invoices, the tighter their own finances become.
Unpaid Invoices and Collections
Every once in a while, invoices go unpaid. It is then the responsibility of the business to perform collections on unsettled accounts. Performing collections is a resource-intensive process. Collections on unpaid invoices can sometimes take up to 45 days to resolve from the time they are started. For example, an unpaid invoice with a staggered schedule of 30 days goes to collections, which takes up to 45 days. So a business can theoretically go up to 75 days without seeing revenue. Expanding this to businesses that issue invoices with staggered payment schedules of 60 or even 90 days, and it can take months to see any revenue. In the meantime, businesses have to make payroll and pay their own bills. A few unpaid invoices can cause cash flow to grind to a halt.
By using factoring services, businesses do not have to worry about unpaid invoices going to collections. With factoring, as an invoice is generated, it is immediately converted to revenue within 24 hours. Factoring reduces the resources needed to track unpaid invoices and eliminates concerns about unsettled customer accounts going to collections. Entrepreneurs can focus on growing their businesses instead of worrying about cash flow or wondering when customers are going to make payments.
Take the Stress out of Accounting
FSW Funding offers the most comprehensive invoice factoring services for many different types of businesses. Contact our offices and put an end to unsettled customer accounts and collections today.