Charter Capital

Category: Small Business News

News and information related to Small businesses and their owners.

  • Success Metrics for Businesses Using Invoice Factoring

    Success Metrics for Businesses Using Invoice Factoring

    One of the biggest questions people have when they first start factoring is: “Is invoice factoring worth it?” And the simple answer is that, for most businesses, it absolutely is. Factoring accelerates cash flow like no other tool can and helps businesses avoid taking on debt. However, to move from an abstract idea of usefulness to a tangible measurement, you need to work with success metrics. Give us a few minutes, and we’ll walk you through what to track and why each area matters.

    Success Metrics Demonstrate How Invoice Factoring Impacts Your Business

    Businesswoman reviewing metrics for businesses using invoice factoring on a tablet with financial charts, bar graphs, and percentage data.Success metrics, or factoring key performance indicators (KPIs), are tools you can use to measure the real impact invoice factoring has on your business. They turn broad ideas like “better cash flow” or “faster growth” into numbers you can track. By watching these business performance indicators over time, you can:

    • Evaluate Financial Impact: Determine whether factoring is strengthening your liquidity and overall financial health.
    • Guide Decision-Making: Use data to decide when and how to continue or expand your use of factoring.
    • Align with Long-Term Goals: Confirm that the benefits of factoring are supporting your broader objectives, such as growth, efficiency, and competitiveness.

    Cash Flow Improvement Metrics

    Cash flow management consistently ranks as one of the top financial challenges for small businesses. In fact, more than a quarter aren’t comfortable with their cash flow, according to a recent U.S. Chamber of Commerce Small Business Survey. Invoice factoring is designed to help with this vital concern by accelerating access to funds that would otherwise be tied up in receivables. To determine whether factoring is working for your business in this respect, you can track the cash flow improvement metrics outlined below.

    Days Sales Outstanding (DSO)

    DSO measures the average number of days it takes to collect payment on invoices. If your DSO drops significantly after using factoring, it’s a clear indication that factoring is working for you.

    Accounts Receivable Turnover

    Accounts receivable turnover shows how many times per year receivables are collected. A higher turnover ratio indicates that invoices are being converted into cash more frequently, which is a direct result of faster funding through factoring.

    Cash Conversion Cycle (CCC)

    Your CCC tracks how long it takes to convert investments in inventory and receivables back into cash. Factoring shortens this cycle by reducing the time receivables remain outstanding, which improves overall liquidity.

    Available Working Capital

    Look at the amount of capital that’s accessible for operating expenses. After factoring, many businesses report higher working capital levels that allow them to cover payroll, pay suppliers promptly, or seize growth opportunities.

    On-Time Vendor Payments

    Making on-time or early payments to vendors consistently is a signal that cash flow is more predictable. This can also improve your relationships with suppliers and potentially open doors to better terms or discounts, plus can potentially boost your business credit score.

    Liquidity Ratios

    Metrics such as the current ratio or quick ratio may improve as factoring increases cash on hand relative to liabilities. These ratios are often used by lenders and investors to gauge the financial health of a business.

    Cost Efficiency Metrics in Factoring

    Tracking factoring cost efficiency allows you to evaluate whether the benefits of factoring outweigh the costs and how factoring influences the overall financial efficiency of your business. We’ll explore some of these factoring KPIs next.

    Factoring Cost as a Percentage of Revenue

    This metric calculates the total fees paid to the factoring company compared to overall revenue. Monitoring it can help you determine if the expense is proportionate to the value delivered.

    Savings from Early-Pay Discounts

    As touched on earlier, many vendors offer discounts for early payment. For instance, you might be offered two percent off if you pay the invoice within ten days. With factoring providing immediate cash, you can take advantage of these discounts, and the savings can substantially reduce or even offset the cost of factoring.

    Reduced Overhead or Loan Fees

    Businesses often rely on short-term loans, lines of credit, or overdrafts when cash flow is strained. If factoring eliminates or lowers the use of these higher-cost financing options, the net cost of capital decreases.

    Administrative Time Saved

    Small businesses lose an average of 14 hours per week chasing invoices, according to Intuit surveys. However, when the factoring company assumes responsibility for collections, your internal costs for accounts receivable management may decline.

    Business Growth Metrics

    When cash flow constraints are lifted, businesses can shift into growth mode. Let’s take a look at some financial performance metrics to keep an eye on here.

    Revenue Growth Rate

    Tracking year-over-year or quarter-over-quarter revenue growth can show you how factoring supports your ability to take on new contracts or scale existing customer relationships.

    Customer Acquisition and Retention

    Reliable cash flow allows you to accept new clients without worrying about payment delays while also maintaining strong service for existing clients. A rising client count or improved customer retention rate is a sign that factoring is translating into growth and stability for your company.

    Order Fulfillment Rate

    The ability to accept and fulfill larger or more frequent orders reflects how factoring frees up capital. For instance, if you previously had to turn down large purchase orders due to cash shortages but can now accept them, you have a clear sign of measurable growth.

    Employee Growth or Retention

    With factoring stabilizing payroll and reducing cash flow stress, businesses often see stronger employee retention. Some even expand their workforce, which is another concrete indicator of growth.

    Operational Efficiency Metrics

    In addition to improving cash flow, factoring can also streamline operations and reduce friction in financial management.

    Invoice Processing Time

    Tracking how quickly invoices are submitted, approved, and funded allows you to identify how much efficiency you’ve gained through factoring. Many businesses go from waiting months for payments to accessing cash within hours or days.

    Bad Debt Reduction

    Most factoring companies perform credit checks on your clients before approving your invoices. This reduces your exposure to clients who may fail to pay, which cuts down on write-offs and strengthens overall collections.

    It’s worth noting that you may also be able to leverage non-recourse factoring to help with this. In a non-recourse agreement, the factoring company absorbs the loss if your client doesn’t pay an invoice for reasons such as insolvency.

    Collection Success Rate

    When a factoring company manages collections, businesses often see higher recovery rates and more predictable inflows compared to handling collections internally.

    Management Bandwidth

    With predictable cash flow, business leaders can devote more time to strategic priorities rather than daily cash crunches. This is harder to quantify but often shows up in metrics such as time-to-market on new initiatives or leadership productivity.

    Boost Your Success Metrics with Invoice Factoring from Charter Capital

    By providing efficient service, top-notch customer care, fast advances, and competitive rates, the right factoring company can help you take your business even further. Charter Capital has been doing this for decades and has a hard-earned reputation for being one of the best factoring companies in the country. If you’d like to boost your business success through factoring, request a free rate quote.

  • 7 Simple Tips for a Smooth Transition to Factoring

    7 Simple Tips for a Smooth Transition to Factoring

    Each year, tens of thousands of small businesses across the country apply for invoice factoring, according to the latest Fed Small Business Credit Survey. While the transition to factoring is typically seamless, it works differently than most funding solutions business leaders are accustomed to. Below, we’ll explore what sets it apart and how to ensure you get off to a smooth start.

    7 Simple Tips for a Smooth Transition to Factoring - Hand pressing a glowing upward arrow, signifying business growth and successful factoring transition

    Why Businesses Transition to Factoring

    It’s often said that cash flow is the lifeblood of all businesses. However, making sure you have enough money coming in to cover the expenses that are leaving your account at any given time is a bit of a balancing act with lots of potential disruptions. For instance, if your cash inflows stop or become sluggish due to slow-paying customers or a seasonal lull, it becomes difficult to cover everyday expenses. Equally, if your outflows increase, even temporarily, due to business growth or unexpected expenses, your standard inflows may not be enough to cover them.

    Larger companies have access to more financial tools, solutions, and reserves, so it’s easier for them to weather these challenges. Smaller businesses often lack in these areas and have been traditionally underserved by the banking industry. This creates a need for unique funding and cash flow solutions, like invoice factoring.

    Factoring Works Differently Than Traditional Financing Solutions

    Instead of getting a lump sum that you have to pay back over time with interest, like you would with a traditional business loan, invoice factoring unlocks the cash trapped in your unpaid invoices. This is money you’ve already earned, but might not receive for weeks or months, depending on the payment terms you set with your clients.

    In short, you’re selling your invoices at a slight discount to a factoring company, also called a factor, like Charter Capital. You receive most of the value of the invoice upfront, and the factor takes over the collections process, freeing you from chasing invoices. When your customer pays the factor, you receive the remaining sum, minus a small factoring fee.

    Factoring vs. Accounts Receivable Financing

    Factoring is often considered a subset of accounts receivable financing or even confused with it. However, it’s important to note that these are two very distinct funding solutions. With financing, the invoices serve as collateral on a loan that you’re taking out with interest and fees that you have to pay back. You still handle the collections process and then make payments to the lender. With factoring, you’re selling the invoice, and there’s nothing to pay back. You also get the added benefit of back-office collections support.

    You Free Up Working Capital without Debt

    You can use the cash in whatever way suits your business best, whether that means meeting payroll obligations, purchasing equipment and supplies, or investing in your business in another way. Because factoring is not a loan and your customer clears the balance when they pay the invoice, there’s no debt or interest for you to repay. This leads to factoring benefits like:

    • Stronger Balance Sheets: Factoring doesn’t show up as a liability on your balance sheet, which can improve your debt-to-equity ratio and make your business more attractive to lenders or investors.
    • Preserved Credit Capacity: Since factoring doesn’t involve borrowing, it doesn’t impact your existing lines of credit or make it harder to qualify for loans in the future. Because of this, many businesses don’t “transition to factoring.” They use it alongside other funding sources as needed.
    • Potential Discounts: Oftentimes, vendors offer early payment discounts or bulk discounts. Factoring can enable you to take advantage of these options, ultimately saving your business money.
    • No Monthly Repayments: You’re not adding a new bill to your monthly obligations when you leverage factoring. This makes it easier to focus on the future and plan.

    Cash Flow Management is Easier with Factoring

    A mere 42 percent of B2B payments arrive on time, according to Atradius. Not surprisingly, this also means most small businesses experience financial challenges due to payment delays. Factoring helps you take control.

    • Predictable Access to Capital: With factoring, you know exactly when funds will come in, which allows you to manage your payables without second-guessing yourself.
    • Eliminated Waiting Periods: Instead of building a cash flow plan around invoice aging, you can get paid within days and focus on the future.
    • Less Stress Around Collections: Most factoring companies take care of collections for you and do so in a customer-centric way. This gives you hours back each week and the freedom to focus on growing your business.

    Getting Approved is Fast and Easy

    Generally speaking, denial rates for business funding are staggering. Only about half of the businesses that apply for funding receive the full amount, according to the Small Business Credit Survey. Looking specifically at business loans, the figure is less than 40 percent. And even though SBA loans and lines of credit are typically thought of as more accessible, less than one-third of businesses that apply receive full funding. Factoring is different.

    All of these traditional solutions rely on the same rigid criteria, such as your business credit score, personal credit, time in business, debt ratios, and more. Meanwhile, factoring companies are more concerned about the likelihood of your customer paying on time. In other words, if your customers are established and creditworthy, you’re likely to be approved for factoring. This is true even if your business is newer or credit-challenged.

    Additionally, funding is directly tied to the value of your invoices. This also means your access to funding automatically scales with your business.

    For instance, at Charter Capital, you can receive your factoring quote and terms the same day you apply. There’s no minimum credit score to qualify, and you can even get funding on your invoices the same day you submit them.

    7 Simple Tips for a Smooth Transition to Factoring

    Getting started with factoring is a seamless process when you’re working with a top invoice factoring company. You’ll likely go through an onboarding process, and they’ll walk you through each step. However, following the tips outlined below can help ensure you’re prepared and make your transition to factoring even smoother.

    1. Ensure Business Factoring is a Fit for Your Needs

    Factoring is a bit like the Swiss army knife of the funding world, so it works in a lot of situations. However, it’s still important to compare the fit before you proceed. If the situations below apply to your business, it’s worth exploring.

    • You Need Working Capital Quickly: Advances typically arrive in 24 to 48 hours, though some companies like Charter Capital offer same-day payments.
    • You Invoice Other Businesses: Most factoring companies only fund B2B invoices. If your clients are consumers, you’ll likely need to find another solution.
    • You Experience Long Payment Cycles: If slow-paying customers are holding back your growth or making it hard to meet expenses, factoring can help level out your cash flow.
    • You Don’t Want Debt: Factoring does not add debt to your balance sheet, so it’s ideal for those trying to minimize their debt. However, sometimes, debt can be good, especially if you’re trying to establish your credit. If this is something you’re working on, factoring can make it easier for you to manage your payables, which indirectly supports strong credit.

    2. Assess Your Business’s Readiness for Factoring

    Once you set the wheels in motion with an application, things can move fast. It’s helpful to ensure your business is ready to go when you submit an application.

    • No Conflicting Liens on Receivables: If another entity, such as a lender or the IRS, has already placed a lien on your invoices, the factoring company cannot fund you until it’s resolved.
    • Invoices Are Clear and Current: Avoid invoices with disputes, vague terms, or outdated charges. Factoring companies typically only work with invoices that are free of issues and newer.
    • Your Clients Are Creditworthy: Since funding is based on your customers’ ability to pay, factoring companies will look closely at your client base.
    • Your Invoicing Process is Reliable: You should have a system in place for issuing timely, professional invoices that clearly outline payment terms.
    • You Have Access to Essential Documents: The factoring company will want to see proof that your business is operating legally and will ask to see common financial documents.

    3. Know What You Need from Your Factoring Agreement

    When you’re applying for a loan, there are very few “levers” you can pull to adjust your terms. For instance, you might opt for a 20-year loan instead of a 30-year loan to reduce the cost of borrowing. With factoring, it’s a little more nuanced than this, so it’s helpful to understand the different options available to ensure your agreement matches your needs.

    • Recourse vs. Non-Recourse: In a recourse agreement, you are responsible if your client fails to pay. In a non-recourse agreement, the factoring company absorbs the loss under certain conditions. The latter typically costs a little more because of this protection. Because of this, and the fact that clients are typically vetted before an invoice is accepted, most businesses opt for recourse factoring.
    • Spot Factoring vs. Contractual Factoring: Spot factoring lets you fund individual invoices as needed. Contractual agreements typically involve a longer-term commitment and volume minimums. Both options have benefits. Spot factoring tends to give businesses more flexibility and control over costs, while contractual options often come with discounts.
    • Term Lengths and Cancellation Terms: Some agreements auto-renew or have cancellation fees. Charter Capital does not require long-term contracts, and you stay in control of which invoices you factor, so these issues are not a concern. However, you should be aware that they can be part of some agreements and decide in advance if they’re something you’re willing to accept.
    • Advance Rates and Fees: Advances are typically between 60 and 90 percent of the invoice’s value. The ceiling is often determined by your industry, risk level, and other factors. However, you can sometimes receive greater or lesser amounts, which can impact your overall costs.

    4. Prepare Your Financial Documents and Be Ready for Factoring Setup

    Although we touched on this earlier in terms of factoring-readiness, it’s worth covering separately. A few things you’ll want to have ready when you apply are outlined below.

    • Proof of Business Formation and Identity: This usually includes your Articles of Incorporation, a driver’s license, and a voided business check.
    • Accounts Receivable Aging Report: This gives the accounting company a snapshot of your unpaid invoices and payment patterns.
    • Customer Contact Information and Contracts: Factoring companies may need to verify the legitimacy of invoices or reach out to clients. Most will be familiar with factoring, so the process is a breeze.
    • Bank Statements and Tax ID Numbers: These are often requested during underwriting to help verify business legitimacy and set up your funding account.

    5. Select the Right Factoring Company

    Businesses often focus on rates when choosing a factoring company. However, some of the best factoring companies charge a little more upfront, but remain competitive, offer better service, and don’t nickel and dime you. Keep the following areas in mind as you compare factoring companies.

    • Industry Specialization: A factor that understands your business model, challenges, and customers is better poised to support your needs. Factoring companies that specialize in specific industries may also offer unique perks that can help your business grow. For instance, at Charter Capital, we can help most B2B businesses, but also offer specialized factoring for trucking and freight services, security firms, staffing companies, consulting and service firms, manufacturing, and oil and gas services.
    • Service and Support: Look for responsive customer service and account managers who can walk you through funding, answer questions, and support your clients if needed.
    • Clear, Transparent Pricing: Rates should be easy to understand. Ask for a breakdown or to see how one of your invoices would be handled.
    • Fast, Reliable Payments: Ask how quickly you’ll be paid after submitting an invoice and clarify when the reserve will be released.

    6. Communicate with Your Team and Clients

    Factoring impacts how payments are processed, so your internal team and external clients should be kept in the loop.

    • Notify Your Billing or Accounts Receivable (AR) Staff: Make sure your team understands the new process, including where to send invoices and how payments are tracked.
    • Update Clients Professionally: Clients are notified about the shift and where to send payments during setup, but it helps to give key clients a proactive heads-up.

    7. Fold Factoring into Your Business Operations

    Once your factoring setup is complete, integrate it into your workflows so it becomes a seamless part of your financial operations.

    • Designate an Internal Point Person: Try to have a single person responsible for managing the factoring relationship to prevent confusion and keep communication efficient.
    • Track Funded Invoices and Reserves: Stay on top of which invoices have been funded, when the reserve will be released, and how fees are deducted.
    • Monitor Cash Flow with New Timing in Mind: With faster payments coming in, you may be able to accelerate vendor payments, payroll runs, or growth investments, but it helps to build a new cash flow rhythm.
    • Keep Records Organized: Maintain clear documentation for audits, renewals, and client questions. Most factoring companies provide portals or reports to help with this.

    Streamline Your Transition to Factoring with Charter Capital

    At Charter Capital, our motto is “Factoring Made Simple.” There are no application or sign-up fees. Approvals and clear terms are provided on the day you apply. And, our decades of experience mean you’ll benefit from a smooth process with free collections services, competitive rates, and no long-term contracts. To learn more or begin the transition to factoring, request a free rate quote.

  • Maximizing Your Business Funding: Tips and Tricks

    Maximizing Your Business Funding: Tips and Tricks

    Did you know that just two in five small businesses that apply for funding are approved for all the funding they seek, according to the latest Small Business Credit Survey? Nearly a quarter are completely denied, and the rest land somewhere in between; in that awkward place where they get some of the cash requested, but not enough to do what they actually need to do. While this may seem grim, there are still lots of often-overlooked business funding tips and tricks. In this guide, we’ll walk you through what you can do before applying, while applying, and after funding to help ensure you get the most capital possible and maximize its use.

    Business Funding Tips for the Preparation Stage

    A person using a laptop showing a "FUNDING" screen with financial charts, alongside a coffee cup, glasses, smartphone, and papers on a wooden desk, highlighting business funding tips.

    If you’re trying to improve your odds of getting a small business loan, start by ensuring your business looks like a responsible borrower on paper at least a few months before you begin applying.

    Improve Your Credit Profile

    Naturally, your credit score is a major deciding factor if you’re seeking traditional funding. Unlike personal credit scores that are managed by Equifax, Experian, and TransUnion, which range from around 300 to over 800, your business credit score can be anywhere from 0 to 100. You’ll still have different scores based on the credit bureau, but in this case, it will be Equifax, Experian, and Dun & Bradstreet (D&B).

    To build small business credit:

    • Register: Ensure you’ve selected a proper business structure and filed the paperwork to make your business a legal entity.
    • Check Your Profiles: Check with each bureau to confirm the info they have about you is accurate and follow up on a regular basis to ensure it stays that way.
    • Pay Bills Early: To get the best possible D&B  score, you actually have to pay vendors and other creditors early, not just on time.
    • Build Where You Can: Establish trade lines with your suppliers and leverage credit in small amounts that you can pay off quickly to begin building your score.
    • Minimize Debt: Avoid taking on debt and reduce debt ratios whenever possible, so funding companies see you’re managing finances wisely and can afford payments.

    Organize Your Financial Documents

    Have clean, up-to-date records. Lenders and investors want to see tax returns, profit and loss statements, and cash flow forecasts.

    Know Your Numbers

    Build business financial literacy skills. This will help you improve your numbers and boost lender confidence. Explore key areas like tax planning, bookkeeping, budgeting, forecasting, and financial statement analysis.

    Diversify Revenue Streams

    Businesses with multiple revenue streams are typically more stable because they’re not reliant on a single area. If customer demand, supply chains, or other areas shift, you have something else to fall back on. Because of this, the perceived risk of lending to your business is often reduced, and you can often secure larger funding amounts.

    Build Strong Banking Relationships Before Seeking Business Loans

    It’s often easier to access lines of credit or negotiate terms if you build business relationships with key professionals like bankers before you need funds.

    Funding Strategies for the Application Stage

    Once you have a strong foundation, explore various funding options to find the right fit and start applying. The following tips will help improve your chances of success.

    Match the Funding to the Need

    Different goals call for individualized tools. Consider using lines of credit for short-term cash flow management, invoice factoring for similar purposes, as well as for slow invoices or seasonal cash flow concerns, and save term loans for equipment or expansion.

    Apply For Small Business Funding Before You Need Working Capital

    Explore working capital options before you’re in a bind and apply before you need funding. This serves two major purposes. First, your business will look better on paper when it’s financially strong, so you’re more likely to get approved and qualify for the level of funding you need. Secondly, this approach allows you breathing room to make informed choices. If you wait until you’re unsure if you can cover payroll or order supplies, you’re more likely to accept whatever terms you’re offered, even if they’re not great and won’t benefit your business in the long run.

    An option like small business invoice factoring is often ideal in these situations, as you can get approved and ensure funding is available ahead of time, and then not use it or pay any fees unless you actually factor an invoice. This can help you manage costs better and speed up the funding timeline if you face an unexpected expense or hit a bump in the road later.

    Have a Professional Business Plan

    A well-written plan with market analysis, financial projections, and an outline of how you plan to use the funds speaks to your professionalism and demonstrates that any money invested in your company will be well spent, which boosts the confidence of lenders and investors. Alternative funding companies also appreciate seeing business plans.

    Explore Alternative Funding Options

    By default, most businesses turn to bank loans for funding. However, approval rates are even lower for traditional business loans than other options, with two-thirds of applicants receiving denials, according to the Small Business Credit Survey.

    Moreover, there are some nuances between “good debt vs. bad debt.” For instance, if taking on debt allows you to increase the net worth of your business or has future value, it often fits in the “good debt” category. But if it doesn’t add to your net worth or could potentially leave you with nothing to show for your payments, it’s likely in the “bad debt” category. When these situations apply, consider alternative financing.

    That might mean using venture capital for startup financing or tapping into merchant cash advances (MCAs). However, it’s important to be mindful of how these choices impact your equity and profitability, as equity dilution may hinder your ability to make decisions, and MCAs tend to come with high costs.

    Invoice factoring also fits into the alternative funding category, but it’s different because it’s not a loan, so there’s no debt to pay off, and it doesn’t reduce your equity. It’s an advance on your unpaid B2B invoices.

    Keep Personal Finances in Good Shape

    Many lenders still look at personal credit scores. Especially for small businesses, your financial habits impact perceived risk.

    Maximizing Business Capital Post-Funding

    At this stage, you’ve strengthened your financial position, applied for funding, and received at least some of the money you needed. Here’s how to ensure that cash goes as far as possible.

    Use Funds Strategically

    It can be difficult to stay focused on your business goals as competing priorities emerge. However, it’s essential to use your funds for their intended purpose. It may help to use a project management system like Wrike or Asana to break your big-picture goals into smaller milestones, so you always have your goals at the forefront of your mind and stay on track.

    Burnout and decision fatigue can also lead to unnecessary spending. Delegate tasks whenever possible to ensure you have the bandwidth to oversee your business activities strategically.

    Reinvest in Growth-Generating Activities

    Prioritize return on investment (ROI). Invest your funds in areas that will help you maximize profitability, tap into business growth resources, or expand your business.

    Monitor Loan Covenants and Triggers

    Some loans have reporting or financial performance requirements. Keep up with them to avoid defaults or higher rates.

    Track ROI on Every Dollar

    Measure the effectiveness of your funding use. This can help you justify the need for funding later and adjust your strategy in real time.

    Maintain Communication with Lenders and Investors

    Transparent updates build trust, which makes renewals, extensions, and future fundraising much easier.

    Maximize Your Business Funding with Invoice Factoring

    Invoice factoring is unique, so it helps businesses in lots of different ways. For instance, it’s accessible, even to businesses that don’t have strong credit or are just starting out. This means you can use it as your core source of funding even if other avenues are closed.

    While you’re using it, it can help you maintain healthy cash flow and engage in activities that boost your credit, which may make it easier to qualify for traditional bank loans and other credit-dependent funding options down the road.

    Many businesses also leverage it to fill gaps left by other sources. For instance, if you need $100,000 to purchase equipment but only get a $50,000 loan, you can factor $50,000 worth of invoices to reach the total sum needed and start generating more revenue faster.

    If you’d like to make the most of your business funding and explore invoice factoring, request a complimentary rate quote.

  • How to Tackle Top Financial Challenges for Small Businesses

    How to Tackle Top Financial Challenges for Small Businesses

    There’s no shortage of financial challenges for small business owners. As soon as you tackle one thing, something new is sure to pop up. Whether you’re concerned about the financial challenges of rapid growth, lean times, or everyday startup woes, you’re likely to face the situations outlined below at some point. Give us a few minutes, and we’ll walk you through how to tackle them like a pro. 

    Poor Visibility and Financial Planning 

    How to tackle top financial challenges for small businesses

    When you have clear visibility into your finances and plan ahead, it’s much easier to weather even unexpected issues. 

    • Equip: Make the most of accounting software like QuickBooks, Xero, and Zoho Books. They can automate recurring tasks, make it easier to tell what’s happening with your finances, and help you avoid common bookkeeping mistakes. 
    • Forecast: Financial resilience begins with understanding where your business stands today and where it’s expected to be tomorrow. Leverage financial forecasting tools to understand your cash flow, expenses, and more, so nothing catches you by surprise and you’re better prepared for what’s to come. 
    • Budget: Create a business budget that aligns with your goals. This will help you allocate resources more effectively and allow you to spot wasteful spending.
    • Save: Make sure you have emergency funds set aside. Treat your savings account like a payable and drop a preset amount into it on a recurring basis. Even if it’s not much, it can help offset unplanned expenses.

    Managing Business Expenses

    As costs continue to climb and margins thin, managing business expenses can seem like an uphill battle. However, there are several strategies that help.

    • Keep Overhead in Check: Ongoing expenses that support operations but don’t generate revenue can quickly pile up as your business grows. To keep overhead costs in check, leverage technology to minimize labor costs, be mindful of stocking excess inventory, and track your costs carefully.
    • Be Methodical About Cutting Costs: Leave no stone unturned when exploring cost reduction strategies. Negotiate with vendors, outsource non-core functions, and find ways to optimize your processes. 
    • Consider Profitability, Not Just Savings: Most budgeting tips involve making cuts, but fail to mention that cutting the wrong things can hurt your business overall. Make sure you’re maximizing profitability, even if that means leaving some expenses intact.

    Slow-Paying Customers

    Just 42 percent of B2B invoices are paid on time in the U.S., according to Atradius. Nearly one in ten is ultimately written off as bad debt. Despite how common this problem is, though, you can still influence payment timelines, unpaid invoices, and how much they impact your company.

    • Reduce Net Terms: Most businesses offer Net 30 or Net 60 payment terms, meaning the customer has 30 or 60 days following the generation of the invoice to pay. Even though these are generous terms, and the concept is essentially the same thing as offering an interest-free loan to customers, people still wait until the last minute and beyond to pay. Shorten your payment window as a first line of defense. 
    • Follow Up: One of the most effective strategies for dealing with slow-paying clients is to provide strong service after the sale. Send reminders just before payments are due, on the due date, and right after. When you realize a customer has missed their due date, reach out to find out why. If there is an issue with the service or invoice, fix it right away. If the customer says they’re unable to pay, see if you can work out payment arrangements to get at least some of the funds now. 
    • Factor: To skip the wait for customer payments entirely, consider invoice factoring. With factoring, you sell your unpaid B2B invoices to a factoring company like Charter Capital. The factoring company then collects payment for you, so you not only get upfront cash but are free from chasing invoices. 

    Inconsistent Cash Flow

    One of the most common financial challenges for small business owners is inconsistent cash flow. You might experience inconsistent cash flow if you’re running a seasonal business, have slow-paying customers, face rapid or declining growth, or struggle with inventory management. These shifts in cash flow make it hard to predict your finances and can show up in various ways throughout your business, like being unable to pay vendors or cover payroll. Most concerningly, 82 percent of business failures are tied to cash flow management issues, according to Forbes. 

    • Avoid Common Mistakes: Some of the most common cash flow management mistakes include things like paying liabilities too early and improperly budgeting for taxes. These can drain your business before you realize you have a problem. 
    • Apply Best Practices: If you want to improve cash flow, make sure you’re monitoring it. Be selective about which customers you extend credit to and ensure you’re billing accurately and promptly. 

    Limited Access to Capital

    If the first thing that comes to your mind when you hear “business financing” is “small business loans,” you’re not alone. In fact, more than half of all small business funding applications are for business loans or SBA loans and lines of credit,  according to the latest Small Business Credit Survey. Yet, less than 40 percent of business loan applicants are fully approved. 

    Thankfully, there are other ways to obtain financial support for businesses. For instance, if you’re looking for working capital options, invoice factoring can help. As mentioned, this is essentially an advance on your unpaid B2B invoices. Because it’s money you’ve already earned and not a loan, there’s no interest accrued and no debt to pay back. Best of all, most businesses qualify because approval is based on your customer’s ability to pay, not yours. 

    Get Help Tackling Financial Challenges for Your Small Business

    With decades of experience and specialized expertise in industries like trucking, oilfield services, staffing, and manufacturing, Charter Capital offers unprecedented service, competitive rates, and same-day funding. To explore how factoring can help you tackle your financial challenges, request a complimentary rate quote.

  • How to Increase Business Sales When You’re Stuck

    How to Increase Business Sales When You’re Stuck

    Most businesses hit a sales plateau at some point. Maybe you’re seeing a flatline in growth, or even a downward trend. This often happens because you’ve reached a ceiling on what you can accomplish with your existing tactics and tools, but it doesn’t mean you’re stuck at this point forever. In this guide, you’ll learn how to increase business sales strategically, so you can move forward without overhauling all your systems at once.

    How to Increase Business Sales When You’re Stuck

    Evaluate What’s Not Working First

    When sales stall, many business leaders jump right into implementing new things, such as running ads, hiring a new sales rep, or adjusting prices. However, jumping into new sales tactics without understanding what’s going wrong is like treating a cough without knowing it’s caused by allergies, the flu, or something more serious. Sure, you might be able to mask the symptom temporarily, but if you don’t know why that symptom is occurring, you can’t fix it. Moreover, the underlying cause may continue to cause damage that will become even harder to resolve over time because you’re silencing the alarm bells.

    Because of this, you should walk through your existing processes first and try to find gaps in sales processes and marketing strategies.

    Check the Customer Journey Step-by-Step

    Map the full experience from the first moment someone hears about your business to the point of purchase to identify where people are exiting the journey.

    • Awareness: Are enough of the right people finding out about you? If you’re reaching lots of people, but the people you connect with are not your ideal customers, it’s time to rethink how you’re targeting.
    • Interest: Once they land on your website or hear your pitch, are they sticking around? Look for signs like the amount of time they spend on your site, the number of pages they visit, the number of times they visit, and engagement with emails.
    • Decision: Do they see enough value in your offer to take the next step? If not, then you may need to play up how your solution benefits them and explore ways to demonstrate the value you bring.
    • Action: Are you making the buying process clear and easy, and do they trust you enough to guide them through the process? Find out if happy customers are sharing their stories or if the loudest voices online are dissatisfied customers. Examine friction points in the final steps that you might be able to address or eliminate.

    Assess Your Offers and Pricing

    Even if you’re offering your products or services at a fair price, your approach or messaging may not be resonating with prospective customers.

    • Offer Clarity: Is it clear what customers receive and how it benefits them? Try running your messaging past people outside your immediate team to see if they feel it’s compelling.
    • Pricing Fit: First, consider your messaging and the price point. If you’re a value-based brand, messaging and pricing should match. If you’re offering high-end products or services, charging too little can actually make people question the quality. You might also find that certain audiences respond differently to the pricing structure. For instance, some may appreciate a discount, while others want a free trial or bonus perks. Some may want to stick with a monthly plan that gives them more flexibility, while others may prefer ongoing subscriptions or upfront payment to secure a discount.

    Talk to Your Sales Team

    Take a look at how sales conversations are handled.

    • Close Rate: The average close rate is around 20 percent, according to HubSpot. There are variances by industry. For instance, finance comes in at 19 percent, and software comes in at 22 percent. If you aren’t meeting industry benchmarks, try to find out why.
    • Sales Message Consistency: Is the messaging that your sales team leverages consistent with your marketing? If not, prospective customers are likely picking up on the disconnect and losing trust.
    • Objection Handling: Almost every prospect will push back in some way. Some will balk at pricing, while others may be unsure of the fit or commitment. If you’re not breezing through objections, develop a list of the most common objections and how to overcome them.

    Review Your Lead Quality and Volume

    Sometimes, business leaders point the finger at sales, as if reps aren’t doing enough with the leads they have. However, the issue can lie with the leads themselves.

    • Lead Quality Issues: Make sure your sales team logs what happens with leads in your customer relationship management (CRM) software. Watch for trends in the comments leads make, such as pricing pushback or claims that your offerings aren’t a good fit. These can be signs that you need to adjust who you’re targeting or your messaging.
    • Lead Volume Issues: Are you getting enough strong leads? If not, then you may want to take a look at your top-performing initiatives and put more of your budget into them while letting go of underperforming initiatives.

    Additional Tips to Increase Business Sales

    Once you’ve examined your existing processes for issues and have addressed these areas, you can begin applying new strategies to increase business sales.

    Leverage the Right Tools for Informing and Improving Sales Strategy

    The right online tools can help you see what’s working, where leads drop off, and how buyers behave before they convert. Let’s take a look at a few examples.

    • CRMs: We touched on customer relationship management software earlier. A good system allows you to monitor lead quality, deal progress, and close rates over time. Some popular choices are Salesforce, HubSpot, and Zoho CRM.
    • Analytics: Track how people find your site and what actions they take once they arrive. The gold standard here is Google Analytics, which is free, but you can also explore alternatives like Matomo, Plausible, and Fathom.
    • Heatmaps: Use heatmaps and session recordings to see which portions of your pages people engage with and friction points. One of the more budget-friendly options is Zoho PageSense, which is free if you already have a Zoho One subscription. You can also use Microsoft Clarity for free. However, options like Hotjar may be more ideal if you exceed what the other platforms can do for you.

    Strengthen Customer Retention

    Did you know that the probability of selling to an existing customer is 60 to 70 percent, while your odds of selling to a new prospect are just five to 20 percent, per Invesp? If you’re trying to boost sales, focus on customer retention and ensure your existing clients are happy.

    Leverage Upselling and Cross-Selling

    One of the fastest ways to boost sales is by increasing the value of each transaction.

    • Upselling: Encourage customers to upgrade or buy a more premium version of what they already want.
    • Cross-Selling: Offer complementary products or services that add value to their original purchase.

    Improve Lead Generation

    When sales are low, you may not have enough qualified leads coming in. Focus on attracting people who actually need what you offer and are ready to take action.

    • Lead Magnets: Offer useful resources like guides or checklists in exchange for contact information.
    • Landing Pages: Create dedicated pages that match ad messages and drive conversions.
    • Referral Programs: Create a customer referral program that encourages happy clients to send others your way, and explore the idea of creating a referral partner program that rewards non-customers for helping your business grow.

    Experiment with New Marketing Strategies

    If your current channels are saturated, underperforming, or have plateaued, it may be time to branch out. Perform short tests with different social networks, partners, videos, and ad strategies.

    Bring in a Pro When Sales Growth Stalls

    If you’ve gone through these steps and didn’t get results or don’t have the time to devote to them, consider bringing in a pro. An experienced consultant can help troubleshoot your existing strategies and identify the best path forward. While there is an upfront expense here, a good consultant will deliver a strong return on investment.

    Keep Your Business Moving Forward While Boosting Sales with Factoring

    It takes time to troubleshoot and implement strategies that increase business sales. If your business is struggling to cover payroll and other expenses while you’re actively addressing your sales concerns, invoice factoring can help. Instead of taking out a loan that leaves you with ongoing payments and debt, factoring accelerates payment on your B2B invoices, so you get cash right away and don’t add debt to your balance sheet. To learn more or get started, request a complimentary rate quote.

  • Top Strategies for Maximizing Profitability

    Top Strategies for Maximizing Profitability

    As expenses rise and the economic climate shifts, profit margins are dwindling for small and midsized businesses across the country. While many have raised their pricing as a means of maximizing profitability, the approach can backfire and may not be right in every situation. In this guide, we’ll explore business profitability strategies you can use to support your company’s long-term health and growth without putting your customer relationships at risk.

    Profitability in Small to Mid-Sized Businesses: A Quick Overview

    Everyone knows that profitability is essential for businesses, but ensuring you stay profitable is easier said than done. Before we get into profit margin optimization, let’s explore the basics a bit.

    Key Types of Profit

    Top Strategies for Maximizing ProfitabilityProfit is typically measured in three ways. Each offers a different view of your business performance.

    • Gross Profit: Your gross profit is a measure of how much money remains after subtracting the direct costs of producing goods or services from your revenue.
    • Operating Profit: Your operating profit reflects what’s left after you deduct overhead and routine business expenses from your gross profit.
    • Net Profit: Your net profit shows the final amount your business keeps after all costs, taxes, and interest have been paid.

    Challenges that Undercut Profitability

    Smaller businesses often face narrow margins and limited flexibility, which makes it harder to absorb cost increases, weather late payments, or reinvest in new opportunities.

    • Low Profit Margins: The average net margin is around seven percent, according to NYU. This means even a minor shift in expenses or revenue can erase your gains.
    • Unstable Cash Flow: You can be profitable and still not have cash on hand, which can impact your ability to cover daily expenses and grow. Because of this, 82 percent of small businesses that fail can trace their issues to cash flow management, Forbes reports.
    • Overlapping Roles: Owners and managers often handle operations, sales, and finance themselves. This limits the time that’s available to focus on maximizing profitability.
    • Fixed Expenses: Rent, payroll, and utilities stay constant, even when sales slow down. If revenue dips, these costs quickly eat into your profit.

    Revenue vs. Profit: Why the Difference Matters

    Maximizing revenue and maximizing profit are two different goals. Knowing how they differ is essential to building a strong, healthy business and reaching your objectives. Revenue refers to the total income your business earns from sales. Profit is what remains after subtracting all your expenses.

    A business can grow its revenue year over year and still struggle financially if costs increase just as fast or faster. For example, expanding your product line might boost sales, but if production or fulfillment costs aren’t controlled, your profit could shrink.

    Profit-focused growth tends to be more sustainable because it considers efficiency, pricing, and customer value, not just volume. Companies that optimize for profit often review their cost structures, refine their pricing strategies, and align offerings with high-margin opportunities.

    To strike the right balance, track both revenue and profit KPIs like cost of goods sold (COGS), gross margin, and net profit, and evaluate how pricing, operations, and customer behavior affect each. This approach helps you grow smarter, not just faster.

    Strategies to Increase Revenue and Improve Profit Margins

    Businesses that want to improve profit margins often start by increasing revenue. Below, we’ll explore a few revenue growth strategies that can help.

    Diversify Revenue Streams

    Relying on a single income source puts your business at risk. If demand shifts or competition tightens, your entire model can become unsustainable. Diversification builds resilience and opens the door to new profit centers.

    • Add Complementary Services: Consider what else your customers may need once they buy from you.
    • Create Tiered Offerings: Introduce premium, standard, and budget versions of your core offering. This allows you to serve different customer segments without lowering your prices across the board.
    • Explore New Channels: If you currently sell only through one method, consider expanding into another area that will allow you to increase your reach without adding major overhead expenses.

    Optimize Pricing Models

    Many businesses underprice their products or services out of fear that they might lose customers or be undercut by competitors. If your business is in this group, small adjustments can have a big impact.

    • Review Costs Regularly: Costs change. If your prices remain static while expenses rise, your margin shrinks. Make price reviews a scheduled part of your operations.
    • Test Value-Based Pricing: Instead of pricing based on cost alone, consider what your product or service is worth to your customer. It may support a higher price if it saves them time or reduces risk.
    • Use Strategic Discounts: Be wary of offering blanket discounts, as they can erode profit margins. Instead, offer limited-time or volume-based promotions that are tied to specific business goals, like clearing excess inventory or boosting early renewals.

    Enhance Customer Retention

    If you aren’t applying customer retention strategies, you should be. It can cost up to 25 times more to acquire a new customer than to retain an existing one, according to Harvard Business Review (HBR). Plus, loyal customers tend to buy more often, spend more in each order, refer others, and cost less to serve over time.

    • Strengthen Onboarding: A strong start improves satisfaction and reduces early churn. Ensure customers know how to get value from what you offer as soon as they start leveraging your products or services.
    • Stay Engaged: Regular follow-ups, personalized communication, and proactive service can all help keep your business top of mind and ensure a smooth experience.
    • Create Repeat Incentives: Loyalty programs, subscriptions, and reordering tools make it easier and more appealing for customers to come back.

    Reduce Operational Costs to Boost Profitability

    Reducing business expenses is one of the most direct ways to improve profitability. However, it’s essential to identify areas for cost management that can improve efficiency without weakening your customer experience or limiting your growth potential.

    Audit Your Spending

    Find out where your money is going before you begin applying cost-cutting strategies.

    • Review Recurring Charges: Subscriptions, software licenses, and service contracts can quietly balloon over time. Cancel anything that’s unused or redundant.
    • Compare Vendor Rates: Pricing for supplies, freight, insurance, and other services vary widely. A competitive review every year or two can help you identify savings opportunities.
    • Track Category-Level Costs: Group expenses by function, such as sales, operations, or administration, so you can see which areas are growing disproportionately.

    Improve Internal Business Efficiency

    Operational waste often hides in everyday routines. Streamlining how work gets done can help you lower costs without reducing output.

    • Automate Repetitive Tasks: If your team spends hours entering data, tracking time, or processing orders manually, automation software can reduce labor costs and errors.
    • Standardize Processes: Inconsistent procedures can create confusion and waste time. Documented workflows help teams move faster and reduce rework.
    • Invest in Training: Skill gaps lead to mistakes and delays. Improving employee training often pays for itself by reducing inefficiency.

    Control Variable Expenses

    Unlike rent or salaries, some costs fluctuate with your level of business activity. These are easier to adjust but still require attention.

    • Monitor Inventory Levels: Excess inventory ties up cash and leads to spoilage or obsolescence. Just-in-time restocking and better forecasting can reduce waste.
    • Limit Overtime: Occasional overtime is fine, but frequent use may signal a need for better scheduling or staffing.
    • Outsource Select Functions: For roles that do not require a full-time hire, such as bookkeeping, marketing, or IT support, outsourcing can help reduce overhead costs.

    Financial Planning for Profit Maximization

    Financial planning gives you the framework to understand where your business stands today, where it’s headed, and how to course-correct before small issues become major setbacks.

    Set Clear Financial Targets

    To boost profitability, you need specific, measurable targets that guide your daily decisions.

    • Define Profit Goals by Period: Break annual targets into quarterly and monthly benchmarks so you can identify trends and react early.
    • Tie Goals to Activities: Link sales goals to lead volume or close rates. Link expense targets to specific departments or functions.
    • Review Targets Regularly: Business conditions change. Ensure your goals reflect the current environment.

    Build and Maintain a Cash Flow Forecast

    Understanding your cash position is essential for effective planning. A cash flow forecast helps ensure that you can meet your obligations while pursuing growth.

    • Project Income and Expenses: Include all sources of revenue and all fixed and variable costs.
    • Update Frequently: A static forecast can become inaccurate in the blink of an eye. Review and revise your forecast monthly or more often if your business is seasonal or high-volume.
    • Model Scenarios: Build best-case, expected, and worst-case projections, so you will know how various outcomes affect your cash flow and profitability.

    Allocate Resources Intentionally

    Ensure your business budget is developed mindfully and designed around your profit goals.

    • Separate Strategic and Operational Spending: Operational costs keep the business running. Strategic spending supports growth. Each needs its own budget and controls.
    • Prioritize High-Return Activities: Direct your resources toward marketing efforts, tools, or hires that measurably improve performance.
    • Plan for Reserves: Profitable businesses still face disruptions. Create a reserve fund to ensure that a single bad month doesn’t derail your long-term plans.

    Improve Your Cash Flow with Invoice Factoring

    Delayed revenue can make it difficult to follow through on plans or act on opportunities, both of which impact profitability. Invoice factoring from Charter Capital gives you access to working capital by accelerating payment on your outstanding invoices. To learn more or get started, request a complimentary rate quote.

  • Quick Guide to Managing Surplus Equipment

    Quick Guide to Managing Surplus Equipment

    When people hear the terms “surplus equipment” or “unused equipment,” they often think of large, obvious assets, such as trucks parked for weeks or months on end, cranes that are no longer in rotation, or outdated production lines that are gathering dust. But surplus equipment shows up in more subtle ways across different industries. In this guide, we’ll walk you through how to identify if you have an issue, why it’s essential to take action if you do, and tips for managing surplus equipment to help keep your company financially strong.

    Quick Guide to Managing Surplus EquipmentWhat Surplus Equipment Really Looks Like

    Surplus equipment isn’t limited to idle or broken pieces. Sometimes it’s items that are underperforming, misallocated, or no longer aligned with your current operations. Knowing how to spot it in your organization is the first step toward rectifying the situation.

    Vehicles without Regular Routes or Assignments

    These can include trucks, cargo vans, trailers, or service vehicles that remain road-ready but spend more time parked than deployed.

    Tools or Machinery That Rarely Leave Storage

    These may still be functional, but if you cannot recall the last time they were used, they’re likely not contributing to your current operations.

    Technology That is No Longer Actively Assigned

    Devices like laptops, tablets, or phones often pile up after turnover or upgrades, especially when no one is specifically assigned the job of managing them.

    Production Equipment Tied to Past Work

    This includes items such as molds, specialized tooling, or machines that were built around processes you no longer use.

    Marketing or Presentation Gear That Stays Packed Up

    Displays, banners, lighting kits, and other portable setups often go untouched between events or after strategy pivots.

    Extra Equipment from a Shift in Headcount or Space

    When your team size or footprint changes, it’s common for leftover equipment to sit unused without being formally retired.

    How Surplus Equipment Affects Your Financial Health

    Keeping surplus equipment isn’t always the wrong move, but it does have financial tradeoffs. If you’re not tracking those, you might be carrying unnecessary costs or missing better uses of your capital.

    Tied-Up Capital

    Equipment often represents a significant upfront investment. If it’s not producing revenue, you are losing out on returns that could be used elsewhere.

    Hidden Operating Costs

    Costs to hold equipment don’t stop just because you’re not using it. You may be paying for things like storage, maintenance, insurance, compliance, or even IT support on an ongoing basis. This can drain your cash flow and make it harder to cover essential expenses. Considering that three out of five small businesses say they struggle with cash flow challenges, and three in ten say they’ve been unable to cover crucial expenses like payroll and vendor payments, per Intuit surveys, it’s a major concern.

    Balance Sheet Bloat

    Surplus equipment still appears on your balance sheet, even if it’s not helping your business earn money. That can make your return on assets look low, which is a red flag for lenders and investors who want to see that you’re using resources effectively.

    Depreciation without Utility

    Equipment continues to lose value when idle. If it depreciates to the point where resale is no longer viable, you lose the opportunity to recover some or all of the cost.

    Lost Opportunity

    Most importantly, every dollar tied up in underused equipment is a dollar not being invested in growth. More than half of all small businesses have lost $10,000 or more because cash flow prevented them from accepting a project or sale, Intuit surveys show.

    Quick Guide to Managing Surplus Equipment

    At this stage, you likely have an idea of which unused assets are holding your business back and how they’re impacting you financially. It’s time to take action.

    Step 1: Take Inventory of What You Actually Have

    The first step of surplus asset management is listing all equipment that is no longer in regular use. This includes machinery, vehicles, tools, and technology. The objective here is to create visibility and identify items that may no longer support current operations, so a simple spreadsheet is often sufficient. Many businesses turn this and later steps into a collaborative effort and build a spreadsheet in Google Sheets or similar, so that everyone is working with the same document in real time.

    Step 2: Assess the Value of Your Assets

    Once you have a complete list, assess each item for both market value and usefulness within the business. Consider factors such as condition, age, and how well it aligns with the current operations. Some assets may be worth keeping if they can be reassigned, serve as backups, or support new initiatives.

    Step 3: Explore All Your Options

    Determine the best way to offload items with no remaining internal use. A few popular methods are covered below.

    • Repurposing Equipment: Equipment repurposing may be an option if you can use the item for a different internal function, training, spare parts, or overflow capacity.
    • Equipment Resale Strategies: Selling unused assets allows you to recover some or all of the value by listing the item through equipment marketplaces, auction platforms, or industry brokers. You can also work with specialized equipment liquidation companies to move things quickly.
    • Donating Items: Provide useful assets to nonprofits, schools, or vocational programs, and consult your accountant to document any potential tax benefit.
      Recycling or Disposal: For outdated or unusable equipment, pursue responsible recycling or certified disposal services to manage waste appropriately.

    Step 4: Address Working Capital and Cash Flow in the Interim

    If you’re experiencing symptoms like cash flow issues or a lack of working capital while working through the process, identify ways to smooth things out. For instance, if you issue B2B invoices, invoice factoring can accelerate those payments. Rather than waiting for your client to pay, you sell your invoices to a factoring company at a slight discount and receive most of the value right away. This method provides upfront cash to cover expenses and doesn’t create debt.

    Step 5: Document What Leaves Your Business

    Accurate documentation paves the way for comprehensive financial reporting and regulatory compliance. Keep detailed records of each asset’s final status, including resale receipts, donation letters, internal transfer notes, or disposal confirmations.

    The Rise of Surplus Buying: Who’s Buying and Why It Matters

    Surplus buying isn’t just an opportunity for buyers—it’s also a strategic solution for organizations managing their own surplus. When businesses actively participate in the secondary equipment market, whether as sellers or buyers, they support a circular economy that reduces costs, minimizes waste, and extends the useful life of assets.

    For sellers, surplus buyers are essential. Startups, nonprofits, and local businesses often seek cost-effective alternatives to brand-new equipment—purchasing used office furniture, packaging tools, commercial kitchen assets, and more. Their demand helps organizations offload unused equipment faster and at better prices, transforming idle assets into working capital.

    By listing surplus assets on platforms like SAM Auctions or SAM Marketplace, companies tap into this growing buyer pool. These platforms connect sellers with qualified buyers, accelerating sales and increasing recovery value. With the help of surplus management software, businesses can also streamline the process, track inventory, and optimize their overall asset management strategy.

    In short, buying is a strategy because it fuels the marketplace sellers rely on—making surplus management faster, more sustainable, and financially effective.

    The Role of Consignment in Smarter Surplus Liquidation

    Consignment is an increasingly valuable part of the surplus management process for organizations with surplus property, such as furniture, fixtures, and equipment (FF&E), or processing equipment. Instead of managing a direct sale, business owners can work with third-party partners to sell assets on their behalf, often generating better returns with less internal effort.

    This method is ideal for businesses aiming to manage their surplus more efficiently while supporting sustainability efforts. It helps reduce holding costs, frees up increased storage, and allows for responsible and sustainable handling of surplus materials. For those in procurement or operating a formal surplus property program, consignment can extend the lifecycle of assets while promoting sustainable surplus strategies.

    Pairing consignment with surplus management software or a broader asset management program improves tracking and reporting, especially when managing diverse resources like refrigeration and FF&E. Consignment helps streamline how you manage, transfer, or retire surplus equipment.

    This approach aligns with broader goals around implementing sustainability and ensuring the best use of resources, all while optimizing outcomes in equipment management and long-term equipment sales.

    Strengthening Business Operations Through Surplus Management

    Surplus management is more than just a cleanup exercise. It’s a proactive strategy that enhances operational efficiency and supports smarter business decisions. When businesses build surplus oversight into daily operations, they gain:

    • Operational Clarity: A real-time understanding of available assets enables faster deployment, prevents workflow disruptions, and reduces downtime.

    • Procurement Efficiency: By tracking asset usage across departments or locations, businesses can avoid unnecessary purchases and ensure equipment is assigned where it delivers the most value.

    • Strategic Flexibility: With fewer resources tied up in unused equipment, leadership can respond more quickly to market changes, scale initiatives, or reallocate space and staff.

    By shifting surplus management from a reactive task to a routine operational discipline, businesses strengthen their ability to adapt, grow, and optimize resources across all functions.

    Making the Right Call: Choosing the Best Path for Surplus Equipment

    With multiple options available—resale, redeployment, donation, recycling, or consignment—choosing the best course of action for surplus equipment comes down to balancing value recovery, internal needs, and sustainability goals. To make the most of each decision, businesses should:

    • Evaluate Cost vs. Recovery: Consider whether the asset’s market value justifies resale efforts or if donation or recycling offers a better return in goodwill or efficiency.

    • Assess Internal Use Potential: Before offloading, ask whether the asset can be repurposed, reassigned, or held as a backup. For multi-site operations, internal redeployment may save future costs.

    • Prioritize Speed vs. Return: If cash flow is tight or storage is limited, faster options like consignment or liquidation may be preferable to longer resale cycles.

    • Align with Sustainability Goals: Recycling, donation, or resale to mission-aligned buyers can reduce environmental impact and support CSR initiatives.

    By applying a consistent framework to surplus equipment decisions, businesses ensure each asset is managed with maximum impact—financially, operationally, and ethically.

    Why Businesses Are Modernizing Equipment Transactions

    Traditional surplus processes can be slow and fragmented. More organizations are turning to digital platforms and surplus management software to:

    • Increase Visibility of Equipment Inventory Across Locations: Ensure teams have real-time access to asset data to improve coordination and avoid redundant purchases.

    • Accelerate Transactions by Connecting Directly with Qualified Buyers: Use digital platforms to shorten sales cycles and improve cash recovery speed.

    • Maximize Recovery Value Through Competitive Bidding Environments: Leverage auctions and marketplaces to drive up final sale prices and reach a wider buyer base.

    Streamlined digital processes free up working capital sooner, allowing businesses to reinvest in new projects, equipment, or technology with fewer delays.

    Embedding Surplus Management Into Financial Planning

    Rather than treating surplus equipment clean-up as a one-time task, you can incorporate surplus management into your broader financial strategy. This shift enables:

    • Proactive Budgeting: Plan for asset reviews and potential liquidations as part of your annual or quarterly budgeting to ensure smoother cash flow and fewer surprises.

    • Lifecycle Forecasting: Align your equipment purchases, maintenance, and retirements with long-term financial goals to improve capital planning and avoid overextension.

    • Operational Agility: When you integrate surplus management into your financial reviews, you can quickly reallocate funds from underused assets to meet shifting priorities or seize growth opportunities.

    • Stronger Governance: Treat your equipment as a strategic asset to improve accountability, simplify audits, and strengthen decision-making.

    Embedding surplus management into your planning cycles ensures it’s not just about cutting losses—it’s about optimizing how you use capital and aligning your assets with business strategy.

    Long-Term Solutions to Prevent Equipment Overstock

    To stay efficient long-term, you’ll need to develop systems and habits that prevent unnecessary accumulation.

    Implement an Equipment Tracking System

    Whether you choose spreadsheets or asset-tracking software, the goal is the same: maintain a clear record of what you own, where it is, and how often it gets used. This will help prevent duplicate purchases and help you make smarter use of existing equipment.

    Build Regular Equipment Reviews into Operations

    Establish a cadence for reviewing equipment use, such as quarterly, semiannually, or as part of your budgeting and planning cycles. This will help you catch unused assets early and reinforce a habit of evaluating need before acquiring more.

    Apply a Lean Approach to New Equipment Purchases

    Before bringing in new equipment, ask whether the task can be handled with existing resources. Leasing, renting, or repurposing may be more cost-effective. Make this a standard part of your decision-making process to keep your business more flexible and reduce long-term clutter.

    Tie Equipment Purchases to Expected Return

    Treat equipment as a strategic investment. Set clear expectations for how it will contribute to revenue, efficiency, or capacity. If the value is unclear or the asset is not likely to be fully utilized, it may not be the right time to buy.

    Get the Capital You Need While Managing Surplus Equipment

    Depending on the strategy you use to offload your unused equipment and how selective you are about ensuring you receive top dollar for it, it can take months or even years to have it fully moved. During this time, cash flow management can become especially challenging. Invoice factoring is an ideal solution for many companies because it doesn’t create debt, and you stay in control of when you factor and which invoices you leverage. This allows you to factor selectively to fill gaps as needed and hit the brakes as soon as your equipment sells. If you’d like to explore the fit for your business, request a complimentary rate quote.

  • Top 5 Tips for Managing Staffing Company Overhead

    Top 5 Tips for Managing Staffing Company Overhead

    Overhead is one of the most critical cost centers in staffing and is also one of the least understood. If you’re running a staffing company, you already know how cash-intensive it is to operate. You’re paying talent before your client cuts you a check. However, what often gets overlooked is how much of your financial pressure comes from overhead itself.

    These costs impact your ability to grow, keep payroll current, and stay competitive in a margin-sensitive field. If your overhead is bloated or poorly timed, it puts strain on cash flow, even if your revenue is growing. Understanding what goes into overhead and how much of it you can control is key to staying financially agile.

    Top 5 Tips for Managing Staffing Company OverheadWhat Counts Toward Staffing Company Overhead

    In the staffing industry, overhead goes well beyond rent and office supplies. You’re managing two customer groups: the businesses that hire your services and the talent you place. That creates a layered structure, which translates to higher overhead than many other service industries.

    When calculating overhead, you need to consider:

    • Internal Staff Salaries: This category includes the recruiters, account managers, admin teams, and executives who support your operation.
    • Employee Benefits and Insurance: Health insurance, unemployment insurance, workers’ compensation, and any perks tied to full-time staff all add to overhead.
    • Technology and Software: Applicant tracking systems (ATS), payroll tools, customer relationship management (CRM) tools, and scheduling systems also fall into this category.
    • Office Space and Utilities: Your physical workspace, internet, phone services, utilities, and even janitorial services are a major component of overhead.
    • Compliance and Licensing: Although often overlooked, costs for staying compliant with labor laws, renewing agency licenses, and managing legal risk must also be accounted for.
    • Marketing and Business Development: This category includes everything from website maintenance to job ads, client outreach, and brand awareness efforts.
    • Training and Onboarding: Lastly, include costs related to upskilling internal staff and preparing new hires to meet client expectations.

    Fixed vs. Variable Overhead Costs in Staffing

    Once you understand what goes into overhead, the next step is recognizing which expenses stay consistent and which ones shift with your workload. This can improve the accuracy of your financial planning, especially when demand surges or dips.

    Fixed Overhead Costs in Staffing

    Your fixed overhead costs remain relatively stable month to month. They include things like office leases, salaried staff, software subscriptions, insurance, and licensing fees.

    Variable Overhead Costs in Staffing

    Your variable overhead costs rise and fall with your placement volume and client activity. Examples include payroll for placed talent, job ad spend, background checks, client travel, and internal training.

    Average Overhead Costs for Staffing Firms

    Overhead costs in staffing are a matter of some debate. On the lower end, average staffing overhead costs are reported at 13 percent of revenue, according to OnContracting. Meanwhile, the American Staffing Association (ASA) places legally mandated labor costs at 14.24 percent alone, and notes that general administrative expenses drain a further 18.7 percent from revenue, placing total overhead at nearly 33 percent.

    This means if your staffing firm’s bill rate is $25.76, and your hourly talent pay rate is $17, you’re bringing in just 85 cents in net profit per hour, which works out to a net profit rate of 3.3 percent.

    In other words, typical margins don’t leave you with much wiggle room or capital to invest in growth. Managing overhead costs is essential to keeping your business afloat and moving in the right direction.

    Top 5 Tips for Managing Staffing Company Overhead

    We’ve covered strategies for managing business overhead costs before, and most of those tactics apply here as well. However, there are unique paths to reducing overhead costs and ways to boost operational efficiency that staffing firms can apply, too.

    1. Audit Internal Headcount Regularly and Minimize Internal Churn to Stabilize Overhead

    It’s common for staffing firms to expand internal teams quickly during periods of growth, but that can lead to inefficiencies. Reevaluate your recruiter-to-placement ratio often and make sure each role is contributing to margin, not just headcount. Addressing this first is key to streamlining staffing operations.

    Managing turnover also comes into play here. Turnover among internal staff can lead to more than just hiring costs—it disrupts operations, delays client deliverables, and drives up long-term overhead through repeated onboarding and productivity loss. The focus here is retention: keeping top talent in place to avoid cyclical inefficiencies.

    To manage this, prioritize retention strategies such as structured onboarding, career development pathways, and proactive workload management. Leveraging HR analytics can also help spot early signs of burnout or disengagement. The result is a more stable team, reduced administrative strain, and more predictable operating costs, all of which help keep overhead under control.

    2. Leverage Tiered Software Plans Strategically

    Many staffing platforms and CRMs offer layered pricing. Make sure you’re not locked into an enterprise plan for tools or features your team barely uses. As part of your cost-saving strategies, scale back when needed or renegotiate terms during off-peak seasons.

    3. Track Fill-to-Ad-Spend Ratios

    Job boards and paid ads are essential, but they can drain your budget fast. As part of your expense management strategies, set internal benchmarks for how many qualified candidates or placements you’re getting per dollar spent, and shift resources to what delivers the best return on investment (ROI).

    4. Defer Bonuses or Commissions Until Clients Pay

    If your team earns performance-based pay, tie those payouts to when client invoices are collected, not just when placements are made. This keeps cash in the business longer and aligns incentives with healthy cash flow.

    5. Use Staffing Factoring to Cover Payroll Gaps

    Payroll management is one of the most difficult parts of running a staffing firm. You most likely wait weeks or months after covering payroll before your client pays you. This is not sustainable on three-percent profit margins, particularly for small and medium-sized staffing firms. With staffing factoring, you can get the money you’ve earned right away. The process is simple.

    • Get Approved: It’s easy for staffing firms to qualify for factoring because approval is based on the creditworthiness of your clients rather than your history or credit score.
    • Receive Payment: Submit your unpaid invoice and receive most of the invoice’s value upfront.
    • Move Forward: Your factoring company collects the balance for you, freeing you from chasing invoices. You receive the remaining balance when your client pays the invoice. There’s no debt on your balance sheet and nothing to repay.

    You’re not required to factor all your invoices or even start factoring immediately after approval, which means you can tap into funding only as needed and can still count on fast payments when major expenses like payroll don’t align with client payment timelines. Your access to funds also scales with your invoice volume, allowing you to grow your business on your terms.

    Work with a Factoring Company That Specializes in Staffing

    The margins seen in the staffing industry are tight. It’s a large part of the reason staffing firms struggle to obtain funding and don’t always qualify for the level of funding they need to scale and thrive. But with decades in the industry and tailored services for staffing firms, Charter Capital understands how your business operates and can work with you to develop a funding plan that meets your needs. To take the first step, request a free rate quote.

  • Improving Your Negotiation Skills for Better Business Deals

    Improving Your Negotiation Skills for Better Business Deals

    Organizations that consistently develop negotiation skills improve their financial outcomes by roughly 30 percent compared to their peers, according to McKinsey research. It makes perfect sense, considering that negotiation touches nearly every part of running a business, from finalizing supplier agreements to setting the terms of new client contracts and discussing payment schedules.

    In this guide, we’ll explore business negotiation tips and strategies, so you can start closing better business deals right away.

    Improving Your Negotiation Skills

    Understand the Value You Bring

    Before you step into any negotiation, you need a clear sense of what your business offers and why it matters. If you walk into a negotiation unprepared in this regard, it’s very easy to over-concede or agree to terms that limit your long-term growth.

    Every business has unique strengths. For instance, yours might be speed to market, specialized expertise, or a proven track record of success. Identifying these strengths allows you to frame your offers with confidence and avoid unnecessary compromises.

    Key Areas to Define Before Negotiating

    • Core Differentiators: Outline what sets your business apart from competitors and how that benefits the other party.
    • Proof Points: Be ready to share examples of past results, client success stories, or industry recognition that support your position.
    • Bottom-Line Impact: Understand how your solution saves money, drives revenue, or improves operational efficiency for the other party.
    • Non-Monetary Value: Recognize additional value you bring, such as faster turnaround times, better customer support, or lower risk.

    Prepare Like a Pro

    Strong negotiations start long before the first conversation takes place. The more prepared you are, the more control you have over the direction and outcome of the deal.

    Effective negotiators build a foundation by understanding their own position, researching the other party’s needs, and developing a flexible strategy that adapts to new information during the session.

    Steps to Strengthen Your Preparation

    • Know Your Numbers: Have a clear understanding of your costs, margins, and acceptable price points before discussions begin.
    • Research the Other Party: Identify their business pressures, goals, and decision-making priorities if possible.
    • Outline Ideal and Acceptable Outcomes: Define the best-case scenario, the outcomes you are willing to accept, and the limits you will not cross.
    • Create a Concession Plan: Rank concessions by importance and determine what you are willing to offer in exchange for better terms elsewhere.

    Once you’re fully prepared and understand the value you bring, the next step is to follow a structured negotiation process—one that guides your conversations from start to finish and helps ensure consistent, mutually beneficial outcomes.

    Mastering the Stages of the Negotiation Process

    Every successful negotiation unfolds through a series of structured steps. Understanding these stages gives business negotiators a framework to apply effective negotiation strategies with more clarity and purpose. This process helps avoid common pitfalls, align expectations, and create value for all parties involved.

    1. Opening: Begin with clear, concise communication. Establish rapport and trust by listening to the counterpart’s goals and presenting your position in a way that invites dialogue.

    2. Bargaining: This is the negotiation’s core, where give and take happen. Effective negotiation techniques include testing anchors, making concessions strategically, and offering creative solutions that lead to win-win outcomes.

    3. Closing: Confirm the terms, clarify expectations, and document agreements. Emotional intelligence is essential to ensure that both parties leave the bargaining table satisfied with the result.

    4. Follow-Up: Solidify the agreement through communication and accountability. Following up builds credibility and supports long-term business relationships, whether within a company or between buyers and sellers.

    By focusing on these essential negotiation stages, even those new to business or taking a negotiation course can develop the business negotiation skills needed to reach mutually beneficial agreements and become better negotiators over time.

    Communicate Clearly and Confidently

    Clear communication sets the tone for the entire negotiation. When you explain your position simply and directly, you reduce misunderstandings and build trust early in the process.

    Confidence grows from your preparation and clarity. The ability to explain your position calmly, listen carefully to the other party’s needs, and respond thoughtfully creates a stronger presence across the table.

    Ways to Strengthen Your Negotiation Communication

    • Use Plain Language: Focus on clear, outcome-driven explanations instead of technical jargon or layered arguments.
    • Frame Proposals Around Value: Show how your offer solves challenges or advances goals for the other party.
    • Practice Strategic Pauses: Allow space after important points to give the other party time to reflect and respond.
    • Manage Your Body Language: Maintain steady eye contact, an open posture, and controlled movements to project calm authority.

    Listen More Than You Talk

    Listening is one of the most powerful negotiation tactics. When you focus wholly on what the other party is saying, you gain insights that can help you shape better offers, uncover hidden outcomes, and build stronger agreements.

    A good rule of thumb is to spend 70 percent of your time listening rather than speaking, Thompson Reuters reports. This approach will give you a deeper understanding of what matters to the other side and create more opportunities to find common ground.

    Ways to Improve Your Listening Skills

    • Ask Open-Ended Questions: Encourage the other party to share details about their needs, priorities, and concerns.
    • Confirm Understanding: Summarize or restate key points to ensure both sides are aligned before moving forward.
    • Stay Fully Present: Focus on the conversation without planning your next response while the other party is speaking.
    • Pay Attention to Nonverbal Cues: Keep an ear out for the person’s tone, pacing, and body language, as these often reveal more than words alone.

    Focus on Building Long-Term Relationships

    Negotiation works best when it creates lasting value. A strong agreement should strengthen the relationship between both sides, laying the groundwork for future business and opportunities.

    When both parties feel respected and see clear benefits, partnerships tend to last longer and grow stronger. Trust earned during negotiations often leads to more referrals, faster agreements down the road, and a better reputation across your industry.

    Ways to Prioritize Relationship Building

    • Aim for Mutual Wins: Structure agreements around shared success and creating results that matter to both sides.
    • Stay Professional Under Pressure: Keep communication steady and respectful, even during difficult conversations.
    • Follow Up After Closing: Reinforce the relationship by checking in, addressing any early concerns, and staying connected.

    Practice, Practice, Practice

    Negotiation is a learned skill. Like any skill, your negotiation strategies will improve with consistent practice, thoughtful reflection, and a willingness to adjust based on experience.

    The more you engage in structured practice, the easier it becomes to read the room, spot opportunities, and respond strategically during real negotiations. Regular exercise also builds both confidence and flexibility, two qualities that define strong negotiators.

    Ways to Build Your Negotiation Skills Over Time

    • Roleplay Different Scenarios: Practice common negotiation situations with your team, rotating roles to build perspective and agility.
    • Seek Feedback After Negotiations: Review what worked, what could have gone better, and where your communication or strategy could be stronger.
    • Study Successful Negotiators: Learn from experienced negotiators through books, interviews, or workshops to add new techniques to your approach.
    • Apply Techniques in Everyday Conversations: Look for opportunities to negotiate small agreements, such as project deadlines or contract terms, to strengthen your skills naturally.

    Eliminate Financial Friction from Negotiations with Invoice Factoring

    Payment terms are one of the most critical concerns in business deals. If you’re the one receiving funds, you want payment right away. Meanwhile, the other party is likely going to push for longer terms. With factoring, you can use longer payment terms as a concession to help secure the deal you want, but without actually having to wait for payment.

    Instead, you’ll sell your invoice to a factoring company like Charter Capital at a slight discount. Your business receives most of the funds upfront. Your factoring company also collects for you, which saves you the time and trouble of chasing payments. You receive the remaining balance when your client pays.

    One of the many things that makes factoring unique is that you don’t have to factor all your invoices or even leverage it when you sign up. For instance, you can become established with a factoring company, and then only choose to factor certain invoices for clients who have negotiated longer payment terms with you.

    Be Prepared with Help from Charter Capital

    If you’d like to explore how factoring can be instrumental in improving business deals or begin leveraging it as part of your negotiation strategies, request a complimentary rate quote.

  • How to Tackle Excess Inventory Management Like a Pro

    How to Tackle Excess Inventory Management Like a Pro

    You probably didn’t mean to overstock. Maybe you were preparing for a surge in demand, a customer delayed a large order, or your procurement team was trying to lock in better pricing. Surpluses have a way of sneaking up on businesses and holding working capital hostage. But, that doesn’t mean you’re going to be stuck in a rut forever. In this guide, we’ll walk you through proven excess inventory management strategies and how to ensure your business stays liquid while you smooth things out.

    How to Tackle Excess Inventory Management Like a Pro

    Subtle Signs Your Business Has Too Much Inventory

    Sometimes it’s really obvious that you’re holding too much inventory. For instance, if your warehouse or storage space is bursting at the seams, you probably identified the problem quickly. However, other times, businesses identify that they have a surplus based on the symptoms. Let’s take a quick look at a few examples.

    Inventory is Not Moving in Line with Project Timelines

    Delays, cancellations, or shifting priorities can leave you with stock that is no longer aligned with your production schedule.

    • Customer or Project Delays: You are holding raw materials or completed units beyond their expected use date because timelines have changed.
    • Idle Stock from Cancelled Orders: Inventory originally earmarked for a specific contract is now sitting unused.

    Cash Flow Feels Tight, Even Though Receivables Are Strong

    When capital is trapped in unsold or unused materials, it limits your ability to operate, even if your customers are paying on time.

    • Increased Dependence on Outside Funding: You are leveraging loans or lines of credit more often to cover normal operating costs.
    • Strained Vendor Relationships: Payment delays are occurring because funds are tied up in inventory rather than being available as cash.

    Materials Are Aging or Degrading

    Certain materials have shelf lives, while others can lose relevance if customer requirements or industry standards shift.

    • Shelf Life Concerns: Chemicals, fluids, or temperature-sensitive supplies are at risk of becoming unusable.
    • Obsolescence Risks: Materials that no longer meet specifications may need to be sold at a loss or written off entirely.

    Production Has Slowed Due to Inventory Imbalance

    Having inventory on hand does not always mean you have the right inventory.

    • Mismatch Between Inventory and Demand: Your team is waiting on certain components, while others pile up unused.
    • Increased Downtime: Jobs are stalled, not because of a lack of materials overall, but because of gaps in what is actually needed.

    How Excess Inventory Hurts Your Business

    At first, it might not feel like a crisis. A full warehouse can even look like a sign of health. However, when inventory levels go unchecked, the effects start showing up in places you may not immediately connect back to overstock.

    Restricted Agility During Shifts in Demand

    In industries driven by contracts, market cycles, or project-based work, speed matters. If too much capital is tied up in the wrong materials, you lose the ability to respond to new opportunities.

    • Slow Reaction to New Orders: You cannot take on new business because you need to clear out materials that no longer fit or because you cannot afford to start more work while your capital is tied up in excess inventory.
    • Delayed Equipment Servicing or Maintenance: If your storage facilities are overfilled, other parts of your operation often get pushed aside.

    Operational Efficiency Drops

    Extra inventory means more warehouse management, more movement, more checking, more tracking, and more room for mistakes. Even if your storage is organized, the overhead of managing unused stock adds friction to every task.

    • Longer Fulfillment and Prep Times: Crews spend more time locating what they need or stepping around what they don’t.
    • Workarounds Become the Norm: Temporary shelving, off-site storage, or shifting production space just to house inventory can drag down your entire workflow.

    Decision-Making Becomes Reactive

    Rather than leading with demand or project planning, your business starts bending around the inventory problem. It’s a dangerous shift because it means the excess is now dictating your strategy.

    • Purchasing Power Gets Thrown Off: You stop buying what you need because the optics of full shelves make it harder to justify new orders, even if they’re more aligned with your current work.
    • Sales and Production Get Misaligned: Teams may feel pressure to move product or use materials just because they’re already in stock, even if they’re not ideal for the task at hand.

    Access to Credit and External Funding Reduces

    Lenders care how quickly your business converts work into cash, and inventory does not count as working capital.

    • Lower Perceived Liquidity: Even if your balance sheet looks strong, you may be seen as cash-poor if your inventory is not moving.
    • Tighter Credit Limits: If excess inventory slows your ability to work or revenue, your access to funding may shrink, which can make it even harder to break the cycle.

    Margins Quietly Shrink Over Time

    Carrying too much inventory leads to slow financial leaks, such as rising insurance premiums, increased energy costs, administrative overhead, and loss from shrinkage or obsolescence.

    Strategic Ways to Reduce Excess Inventory

    If you’re holding too much inventory, your first instinct might be to offload it fast, but the smarter move is to take a step back and approach it systematically by applying inventory optimization strategies.

    Start with an Inventory Audit

    Get clarity before you begin leveraging any new inventory optimization strategies. Start by getting the full picture of what’s in storage, where it’s located, and how it aligns with your current and upcoming needs.

    • Segment by Usability: Identify which items are still relevant, which are aging or obsolete, and which have no clear purpose tied to upcoming projects.
    • Match Against Demand: Compare your current inventory to active contracts or forecasted jobs. Anything without a clear use case in the near future is a candidate for action.

    Stop Reordering Automatically

    Many companies overstock by habit. If you set reordering thresholds too high or fail to adjust them during a slowdown, you can easily double your inventory before anyone realizes what happened.

    • Pause Standing Orders: Put a temporary freeze on automatic purchasing for anything that’s not moving.
    • Review Forecast Assumptions: Adjust your planning models to reflect actual current demand, not last quarter’s projections.

    Bundle or Repackage Inventory

    Sometimes the raw materials or partial builds you’re sitting on can be reworked into something more viable. This is especially useful for manufacturers with excess components or semi-finished goods.

    • Consolidate into Kits: If individual parts are hard to move, consider bundling them into kits for service, repair, or sale.
    • Convert into Alternate SKUs: Repackage or rebrand materials for different applications if the market allows.

    Identify Secondary Channels

    Even if materials aren’t moving within your primary business model, it doesn’t necessarily mean they’re worthless. There may be aftermarket, regional, or international buyers who can use what you can’t.

    • Resell Through Industrial Surplus Platforms: For example, companies like Aucto and HGR specialize in buying and reselling surplus equipment, components, and manufacturing inventory.
    • Explore Contractor or Subsupplier Needs: Smaller players may have demand for overstock at negotiated rates.

    Involve Operations in the Plan

    Loop your operations team in. They know what’s needed, what’s viable, and where hidden overstock is likely to be stored.

    • Create a Cross-Functional Team: Bring together purchasing, production, logistics, and finance to review the strategy.
    • Set Specific Reduction Goals: Treat it like a project with clear targets rather than a quick cleanup.

    Track Weekly Progress

    Inventory reduction is easy to deprioritize once work picks back up. To avoid this, layer in accountability.

    • Assign Ownership: Make a specific person responsible for driving the process and reporting results.
    • Watch Key Metrics: Inventory turnover rate, carrying cost, and space utilization can be used as indicators of progress.

    How to Maintain Liquidity While Reducing Overstock

    Your stock level reduction strategy will take time. Unfortunately, your payroll, vendor obligations, and new projects will not wait for you to clear the shelves. Free up cash during the process wherever possible without making shortsighted cuts that can hurt your long-term capacity.

    Slow Spending without Stalling Operations

    It’s tempting to implement blanket spending freezes when cash feels tight, but doing so can hurt productivity, delay new orders, or damage supplier relationships.

    • Audit Discretionary Spending: Look for expenses that don’t support current output or won’t help clear inventory.
    • Leverage Supplier Discounts: If your vendors offer early payment or volume discounts, explore ways to take advantage of them.

    Negotiate Short-Term Terms with Vendors

    Vendors are often more flexible than businesses expect, especially when it comes to long-term buyers.

    • Extended Terms: Ask for temporary extensions or payment deferrals on outstanding orders.
    • Smaller, More Frequent Orders: Shift to leaner procurement cycles to avoid adding to overstock.

    Avoid Long-Term Loans and Credit Lines Unless Necessary

    Be cautious about taking on traditional loans or leveraging your credit lines.

    • Weigh the Risks: Traditional loans are often slow to close, hard to qualify for, come with strict terms, and can drain resources with ongoing payments. Meanwhile, credit lines can be challenging to pay off and come with hefty ongoing interest payments.
    • Consider Alternatives: Rather than borrowing money you have to pay back, explore other funding solutions, such as invoice factoring.

    Accelerate Cash Flow with Invoice Factoring

    If you have unpaid invoices from B2B customers with strong payment histories, turn them into working capital with invoice factoring, also referred to as accounts receivable factoring. With factoring, you sell your invoices to a factoring company, also called a factor, at a slight discount and get most of the value right away. When your customer pays the invoice on their normal terms, you receive the remaining sum minus a small fee for the service.

    • Boost Liquidity During Cleanup: Factoring can accelerate cash flow while you’re handling excess inventory management. Use it to ensure you have cash on hand to cover ongoing needs, so your surplus doesn’t slow your growth or cause lasting damage.
    • Maintain Momentum: Once your cleanup project is complete, continue working with your factoring company as needed to cash in on easy payment and volume discounts with suppliers and ramp up as needed to accept large orders.

    Streamline Excess Inventory Management with Charter Capital

    With more than 20 years of experience in midsize and small business invoice factoring, as well as expertise in B2B industries known for occasional overstock issues like manufacturing and oil and gas services, we can help your business stay liquid by providing working capital as soon as the same day you submit your invoices for factoring. To take the first step, request a complimentary rate quote.