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.
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).
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.
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
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.
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.
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.
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.
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.
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
Profit 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.
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.
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.
Even though most businesses think they’re prepared to manage disasters, only a quarter actually are, the U.S. Chamber of Commerce Foundation reports. Supply chain delays, economic uncertainty, or even a key client defaulting on a payment can send shockwaves through most businesses. A strong business continuity plan (BCP) ensures that, when something goes wrong, your company keeps moving forward. Factoring and business continuity go hand-in-hand, giving your business the financial stability and resilience it needs to persevere.
Continuity Plans vs. Disaster Preparedness Plans vs. Crisis Management Plans
Before we get into the specifics of continuity plans, it’s helpful to understand how they differ from disaster preparedness and crisis management plans. Each plays a crucial role in protecting your business, but they serve different purposes.
Business Continuity Plans Keep Operations Running
A BCP ensures your company can keep operating when disruptions occur. It focuses on maintaining essential functions, minimizing downtime, and keeping cash flow stable. The goal is to have systems in place that allow your business to function through challenges.
Disaster Preparedness Plans Reduce the Impact of Major Events
A disaster preparedness plan focuses on preparing for large-scale emergencies, such as natural disasters, fires, cyberattacks, or other catastrophic events. It outlines what steps to take before, during, and immediately after an event to protect people, assets, and infrastructure. It also includes components of business resilience to ensure your business can bounce back quickly once the immediate issue is addressed.
Crisis Management Plans Control the Response
A crisis management plan focuses on managing communication, decision-making, and reputation during a crisis. It outlines who is responsible for handling media inquiries, internal messaging, and stakeholder updates. The goal is to control the narrative, minimize panic, and protect the company’s brand.
Risks of Not Having a Business Continuity Plan
If your business isn’t prepared, it’s forced to react quickly. In these cases, knee-jerk reactions rather than strategic responses are common. As a result, you’re likely to experience one or more of the issues outlined below.
Revenue Disruption
If operations pause, so does income. Without a financial backup plan, even a short-term issue can create long-term instability. This sentiment is echoed in U.S. Chamber of Commerce Foundation research, which shows around one-third of businesses take six months or more to fully recover from an incident, while one in ten takes longer than a year.
Damaged Reputation
Customers and partners expect reliability. If your business cannot deliver consistently, they will look elsewhere.
Cash Flow Shortages
Many businesses struggle, not because they lack sales, but because they lack liquid capital. Common issues like delayed payments, supply chain disruptions, or a sudden expense can create an immediate need for working capital.
Regulatory Compliance Issues
Some industries require businesses to have continuity plans. Failing to prepare could lead to penalties or legal risks.
Continuity Plans Are Multifaceted
A continuity plan helps ensure your business remains strong no matter what challenges arise. A few key components of continuity plans are covered below.
Operational Readiness
Your business continuity plan should identify critical processes and outline steps to keep production, service delivery, and logistics running during disruptions.
Financial Safeguards
A strong plan includes funding strategies such as invoice factoring to ensure your business has access to working capital when cash flow is tight.
Customer and Supplier Communication
Clear protocols must be in place to determine how and when to update stakeholders about changes to operations.
Technology and Data Recovery
Safeguards should ensure that business-critical systems, financial records, and customer data remain accessible in the event of cyberattacks or technical failures.
Why Factoring and Business Continuity Plans Go Together
Many businesses assume operational problems are the biggest threats to continuity. In reality, cash flow issues are what usually force companies to shut down. Factoring plays a crucial role in this by providing immediate access to working capital when you need it most.
Factoring Acts as a Cash Flow Safety Net
Most businesses rely on steady cash flow to cover payroll, rent, and supplier payments. However, disruptions can put financial strain on operations. Factoring allows you to unlock the cash trapped in unpaid invoices to prevent liquidity shortages that could otherwise force you to make difficult decisions like delaying payroll or vendor payments.
Factoring Reduces Dependence on Emergency Loans
When cash flow tightens, businesses often resort to emergency loans or lines of credit, which come with high interest rates and rigid payment terms. Factoring is a debt-free alternative. Your business receives cash based on work already completed. This allows you to respond to disruptions without financial burdens.
Factoring Can Help Keep Supply Chains Intact
One in five service firms and two in five manufacturers say supply chain disruptions have recently impeded their business activities, according to the Federal Reserve Bank of New York. Maintaining strong relationships is key to minimizing these issues, and making timely payments to vendors is the first step. Factoring ensures that vendors are paid on time to keep supply chains strong and stable.
Factoring Supports Rapid Recovery After Disruptions
After a major disruption, such as a natural disaster, ransomware attack, or loss of a key client, businesses often need an injection of capital to get back on their feet. Factoring is a fast solution that can help your company stabilize cash flow without waiting for traditional financing approvals.
How Invoice Factoring Works During a Disruption
When business operations are interrupted, whether by economic uncertainty, delayed customer payments, or supply chain issues, maintaining business continuity requires immediate access to capital. This is where invoice factoring services provide a practical advantage. Instead of relying on traditional business loans, many companies use factoring to convert outstanding invoices into working capital.
Here’s how the process works: A business owner sells accounts receivable to a third party, known as a factoring company, for a percentage of the total invoice value, often 80 to 95 percent. This sale of an asset results in a cash advance based on completed goods or services, giving the business immediate cash flow without adding debt. The factoring company takes over the collection process, and once the customer pays the invoice, the remainder, minus a small fee, is released to the business.
Because factoring is a financial solution tied to already-delivered work, companies can avoid waiting for clients to pay and continue meeting financial obligations without disruption. Invoice factoring is often the difference between maintaining daily operations and entering financial trouble, especially for small businesses, B2B providers, and trucking companies, where cash flow gaps can quickly halt progress.
Factoring also supports business growth by improving liquidity during volatile periods. In short, factoring turns receivables into immediate cash, offering flexible funding that aligns with real-world business needs without the delay or complexity of conventional financing options.
How to Fold Factoring into Your Business Continuity Plan
Now that we’ve covered the background on business continuity plans and factoring, let’s explore the steps involved in pairing them together.
Assess Your Cash Flow Risks
Identify scenarios where customer payment delays or unexpected expenses could impact operations. Determine how much of a financial buffer your business will need to overcome these challenges.
Establish a Factoring Partnership Early
The timeline for approval and first factoring funding is relatively quick and can often occur within a few days. Here at Charter Capital, you actually receive your factoring quote and terms the day you apply and can take advantage of same-day funding as well. Even still, every hour matters when you’re trying to meet a critical expense like payroll, so it’s best to get established with a factoring company before you experience a disruption.
Use Factoring as a Financial Buffer
Instead of relying on loans and other financing methods that come with debt and interest, tap into factoring as needed to prevent disruptions or resolve them quickly when they occur.
Strengthen Your Business Continuity Plan with Factoring
By incorporating factoring into your business continuity plan, your company can ensure financial stability, protect key relationships, and maintain operations through challenges, all without taking on debt. To learn more or get started, request a complimentary rate quote.
No matter which side of the table you sit on during contract negotiations between two businesses considering a partnership, payment terms will always be a major focal point. Businesses providing goods and services want to be paid faster, while businesses receiving them want to delay payment as much as possible. In a perfect world, the two businesses will find a sweet spot that works for both. In the real world, the larger business usually has clout. If you don’t accept their terms, they’ll find someone who will. The good news is that you can work with these larger companies and secure lucrative contracts and not have to worry about cash flow even if they refuse to budge on payment terms. Invoice factoring and supply chain financing are two solutions that make it possible. But, they work in different ways. We’ll explore them both in detail below, so it’s easy to see which fits your situation best.
Factoring: An Overview
If your business provides goods or services on net terms, meaning your customers get a certain number of days to pay after invoicing, you know all too well the challenges that come with payment delays. Invoice factoring solves this by letting you sell those unpaid invoices to a factoring company, also called a factor, in exchange for immediate cash. The process is also referred to as “accounts receivable factoring” or simply “factoring.”
The Factoring Process
Here’s a quick overview of how the factoring process typically works.
Perform Your Work: Deliver services or goods like you usually do, then generate an invoice for your client.
Sell the Invoice: Your factoring company purchases the invoice from you at a slight discount. The discount rate is typically between one and five percent of the invoice’s value.
Get Immediate Cash: Receive most of the invoice’s value right away. In most cases, the business receives 80 to 95 percent of the invoice’s value, though some factoring companies, like Charter Capital, offer up to 100 percent.
Focus on Your Business: Your customer remits payment to the factor based on the terms you’ve set, typically 30, 60, or 90 days. The factor follows up as needed, freeing you from chasing invoices.
Receive the Remaining Balance: Once your customer pays, the factoring company sends you the remaining balance, minus a small fee for the service.
Benefits of Factoring
Unlike a loan, factoring doesn’t create debt. You’re selling an asset. This also means:
No Payments: Your customer clears the balance when they pay the invoice. In contrast to loans, there are no monthly payments for you to make.
Easy Approval: Rather than focusing on your credit, factoring companies ensure your customer has the bandwidth to pay. Because of this, a lot of businesses that don’t qualify for loans can still be funded through factoring.
More Consistent Cash Flow: With factoring, you know exactly when payments are coming in, allowing you to manage payroll, cover materials, scale your business, and more, with greater confidence.
Additional Services: Factoring companies may also offer services that help with things like credit management and working capital optimization, so your business grows stronger.
The Hidden Costs of Delayed Payments (And Why Fast Cash Flow Matters)
When customers delay payment for 30, 60, or even 90 days, the impact goes far beyond a temporary cash crunch. Delayed payments silently erode your business’s ability to operate smoothly, often leading to:
Lost Growth Opportunities: Lack of capital can prevent you from taking on new contracts or bulk orders.
Higher Borrowing Costs: Businesses often turn to credit cards or short-term loans, which carry high interest rates and add debt to the balance sheet.
Strained Supplier Relationships: If you can’t pay your suppliers on time, they may shorten terms or pause shipments, disrupting your supply chain.
These financial strains aren’t always visible at first, but over time, they reduce flexibility and can hinder long-term growth.
A Smarter Way to Manage Cash Flow
To avoid these issues, many businesses turn to invoice factoring, a funding solution that converts unpaid invoices into immediate working capital. Unlike loans, factoring doesn’t create debt. It gives you quick access to cash based on work you’ve already completed.
For small-to-midsized businesses navigating long payment cycles, factoring is more than just a cash advance—it’s a tool for smoother operations, faster growth, and stronger financial resilience.
Who Uses Factoring
Factoring is common in business-to-business (B2B) industries with long payment cycles. A few examples are highlighted below.
Trucking and Freight: Owner-operators and fleet businesses tap into freight factoring when they need cash for fuel, repairs, driver pay, and more.
Manufacturing and Wholesale: It’s common for suppliers to wait months for payment from retailers and big-box stores. With tailored invoice factoring for manufacturing, it’s easy to maintain smooth operations while working with large clients.
Staffing Agencies: It’s common for agencies to pay staff weekly despite clients not paying for 30 or more days. With staffing factoring, the agency gets the funds right away, so it’s easy to cover payroll and retain top talent.
Security: Similarly, security companies dispatch guards and must be prepared to scale on demand to meet the needs of their clients, despite waiting a month or more for payment after services are rendered. By tapping into specialized factoring for security guard companies, the agency can maintain smooth operations and offer comfortable payment terms to clients that help lock in lucrative contracts.
Supply Chain Financing: An Overview
Supply chain financing (SCF), also referred to as reverse factoring, is a tool that helps businesses extend payment terms to suppliers while ensuring those suppliers get paid faster. Instead of waiting weeks or months for an invoice to clear, suppliers can get paid earlier, often at a discounted rate, through a third-party financer.
The Supply Chain Financing Process
Let’s take a look at how the SCF process typically works. In this example, let’s assume that you are the buyer. You’ve ordered materials from a supply company. They normally expect payment within ten days, but you’re accustomed to having 60 or 90 days to pay and your supplier cannot wait that long for payment.
Buyer Receives Invoice: You (the buyer) receive an invoice from your supplier and approve it.
Supplier Decides: Your supplier has the option to get early payment through the funding provider you’ve selected.
Instant Payment to Supplier: The funding provider pays your supplier right away, minus a small discount for early payment.
Buyer Pays Later: You (the buyer) pay the funding provider later on your usual payment terms. Instead of paying within ten days like the supplier wants, you get the longer payment window that you need.
Benefits of Supply Chain Financing
Supply chain financing helps keep suppliers financially stable while giving you, as the buyer, more flexibility on payments. This also means:
Longer Terms for You: With SCF, you get longer payment terms, which helps ensure you have more working capital on hand.
Instant Payment for Suppliers: Suppliers get paid early, which reduces their cash flow strain.
Stronger Relationships: SCF eliminates payment friction, paving the way for stronger relationships between buyers and suppliers.
Who Uses Supply Chain Financing
This type of business financing is typically used by larger companies with strong credit ratings that want to keep their company supply chains running smoothly. A few examples are covered below.
Retail and Ecommerce: Large retainers need steady inventory but also want to keep cash in hand.
Manufacturing: Factories that rely on multiple suppliers for raw materials can ensure their production stays steady without any upfront capital strain.
Automotive and Aerospace: These industries have complex global supply chains that require precise cash flow management.
Factoring vs. Supply Chain Financing: Which One Makes Sense for Your Business?
Both invoice factoring and supply chain financing improve cash flow, but they serve different purposes. The best option depends on whether you’re the supplier (person waiting to get paid) or the buyer (wanting extended payments).
Key Differences in Factoring vs. Supply Chain Financing
Let’s do a quick comparison of the key features and how they differ.
Who it Benefits: With factoring, suppliers and service providers benefit. With SCF, buyers and large corporations benefit.
What it Solves: Factoring helps address slow customer payments, while SCF addresses the need for extended supplier payment terms.
Who Pays Fees: With factoring, the business that’s selling the invoice pays the fees. With SCF, the supplier pays the fees if they opt for early payment.
How it Works: Factoring is the sale of invoices for upfront cash, while SCF allows suppliers to get paid early through a third-party funding provider.
Who Qualifies: Businesses with strong-paying customers can qualify for factoring, while buyers with high credit ratings can qualify for SCF.
Common Industries: Factoring is popular in industries like trucking, manufacturing, staffing, and security, while SCF is used more by the retail, manufacturing, automotive, and aerospace industries.
When to Use Factoring
Factoring is a good fit if:
You’re a supplier, contractor, or service provider waiting on slow payments.
Your customers have long payment terms, such as 30 to 90 days, but you need cash now.
You want quick access to funds without taking on debt.
When to Consider Supply Chain Financing
SCF is a good fit if:
You’re a buyer who wants to extend payment terms while keeping suppliers flexible.
You work with suppliers who may need early payments to avoid cash flow issues.
Your company has a strong credit rating that makes financing terms more favorable.
Accelerate Your Cash Flow with Charter Capital
If you operate a small-to-midsized business and are tired of waiting for payments or your business stability and growth are hindered by slow-paying clients, factoring is a simple, accessible, and debt-free solution. To learn more about how it might fit into your financial strategy, request a free rate quote.
Did you know a typical mid-sized business spends almost two days each week chasing payments, according to Intuit? While this figure may seem unreal to some, it’s only the tip of the iceberg for others. But it doesn’t have to be this way.
Technology in business-to-business (B2B) payments is rapidly evolving. On this page, we’ll explore how technology in B2B payments can help you save time, accelerate payments, reduce costs, strengthen relationships, operate more securely, and improve cash flow management.
The Evolution of B2B Payment Trends and Solutions
In recent years, business-to-business payment processes have undergone significant transformation, driven largely by technological innovations. Traditionally, B2B payments involved lengthy cycles due to paper invoicing, manual approvals, and slower bank processing times. However, recent trends in B2B payments, such as the rise of digital payment methods, have significantly improved efficiency and accuracy.
One notable trend is the adoption of electronic payment systems, allowing businesses to make payments without the delays associated with traditional methods. Automated B2B payment solutions, such as ACH payments and digital B2B payment solutions, now offer faster payment processing and real-time visibility into transactions. Companies can also leverage global payment solutions to accept payments from international partners more easily, thus reducing the risks of payment delays or longer payment cycles.
Another key trend is the shift towards automating B2B payment processes. By adopting automated solutions, businesses can reduce human error, eliminate manual tasks, and speed up payments, contributing to better cash flow management. Furthermore, the integration of blockchain-based payment systems offers improved security by making transactions transparent and tamper-resistant. The B2B payment market is expected to continue evolving, with more businesses exploring online payment options and electronic platforms to stay competitive.
The Fintech Revolution in B2B Payments
The fintech revolution in B2B payments has transformed how businesses conduct transactions, making processes faster, more efficient, and increasingly secure. Historically, B2B payments were often characterized by manual processes, which were time-consuming and prone to errors. The advent of fintech has changed all that, leveraging technology to streamline payments and eliminate many inefficiencies plaguing traditional methods.
The Rise of Fintech: A Historical Perspective
The rise of fintech in the B2B sector can be traced back to the early 2000s when digital payment systems started gaining traction. Initially, these technologies were more consumer-focused, but businesses quickly recognized their potential. Companies like PayPal began to offer services that catered to business needs, facilitating faster and more reliable transactions. Over the past few decades, the B2B payments landscape has evolved rapidly, with fintech companies offering solutions that speed up transactions and provide greater transparency and security.
These shifts have also been seen in invoice factoring. Today, businesses can leverage factoring platforms that are fully digital, providing quick and easy access to working capital. With just a few clicks, companies can submit their invoices and receive funds immediately, allowing them to maintain smooth operations and take advantage of new opportunities without the typical wait times associated with traditional payment methods.
Key Players in the Fintech Revolution
Some of the key players driving this revolution include companies like Stripe, Square, and PayPal, which have expanded their services to cater specifically to B2B needs. These brands offer many services, from payment gateways to invoicing solutions, that help businesses manage their finances more effectively. For example, Stripe’s payment platform has become a go-to solution for companies looking to integrate seamless payment processing into their operations, offering features like recurring billing and automated invoicing that save time and reduce administrative overhead. In factoring, Charter Capital paved the way with instant approval, digital invoice processing, and same-day payments that eliminate the traditional 30, 60, or 90-day waits for customer payments.
Popular Types of B2B Payments: What Companies Are Using
Businesses today have access to a variety of payment methods to facilitate B2B transactions. The most popular types of B2B payments include ACH payments, credit card payments, and wire transfers. Each method offers distinct advantages depending on the transaction size, security requirements, and the speed at which businesses must settle invoices.
ACH payments, part of the automated clearing house payments network, have gained popularity for their efficiency and cost-effectiveness, especially for domestic transactions. These payments are typically processed within 1-2 business days, making them a reliable option for recurring payments and longer payment cycles. For faster cross-border payments, wire transfers remain a preferred choice due to their ability to settle international transactions quickly, albeit at a higher cost.
Increasingly, companies are also turning to digital B2B payment platforms that integrate online payment options. By using electronic payment platforms, businesses can offer more payment types and improve the overall payment experience for their partners. Additionally, emerging technologies such as blockchain-based payment solutions are creating new avenues for secure, instantaneous transfers that eliminate the need for intermediaries, especially for high-value international transactions.
Advancements Driving Faster Transactions
In addition to these service providers, fintech advancements have played a significant role in driving faster transactions. Blockchain technology, for example, is reimagining the industry. By providing a decentralized ledger system, blockchain can facilitate near-instantaneous transactions that are secure and transparent. Meanwhile, digital wallets and payment gateways make it easy for companies to send and receive payments anywhere in the world without the delays typically associated with cross-border transactions.
The fintech revolution is not just about speed and efficiency, though. It’s also about enhancing the overall customer experience. By leveraging these technologies, businesses can offer more flexible payment options to their clients and improve cash flow management while reducing the risk of fraud. This holistic approach to B2B payments is why fintech has become vital to modern business operations.
How Digital B2B Payment Solutions Streamline the Payment Process
Digital B2B payment solutions have revolutionized how companies handle financial transactions, enabling them to operate more efficiently and securely. Traditional B2B transactions often involve paper-based processes that are prone to delays, but the shift to digital payment methods has significantly reduced payment cycles. Businesses now use automated B2B payment platforms that offer fast, secure, and traceable transactions.
One major advantage of digital payment solutions is the ability to offer a variety of payment methods. Whether through ACH payments, credit card payments, or electronic payment methods, businesses can now offer multiple payment options, making it easier for their partners to settle invoices. Digital payment platforms also help businesses manage their finances more effectively by providing instant access to payment statuses and historical data, which improves decision-making.
Moreover, digital platforms enhance security by incorporating payment fraud controls. Using encryption, tokenization, and multi-factor authentication, these systems ensure that B2B payment processes remain secure, reducing the risk of fraud or data breaches. As B2B payments typically involve larger sums than B2C payments, the need for security is paramount. As businesses continue to adopt these solutions, they will benefit from faster, more reliable, and timely payments.
Ensuring Security in B2B Transactions
Security is a major concern in B2B transactions, especially as the volume and complexity of digital payments continue to grow. The expansion of fintech has introduced new opportunities for streamlining payments, but it has also brought new challenges in terms of safeguarding sensitive financial data. Ensuring security in B2B transactions requires a multi-faceted approach that involves advanced technologies, robust cybersecurity measures, and strict regulatory compliance.
Cybersecurity Measures for Safe Transactions
Cybersecurity in B2B payments is the first line of defense against fraud, data breaches, and other malicious activities. Companies increasingly rely on encryption and tokenization technologies to protect transaction data.
Encryption
Encryption involves converting sensitive data into a code to prevent unauthorized access. This ensures that even if data is intercepted during transmission, it remains unreadable to anyone without the proper decryption key. For instance, when a business sends payment information through a digital gateway, that data is typically encrypted to safeguard it from cyber threats.
Tokenization
Tokenization takes security a step further by replacing credit card information and other sensitive data with a unique identifier or “token.” This token has no exploitable value, so even if cybercriminals manage to steal it, they cannot use it to perform unauthorized transactions. Tokenization is particularly useful in recurring payments and stored payment information, providing an extra layer of protection against data breaches.
Multi-Factor Authentication
Beyond these technologies, businesses are also implementing multi-factor authentication (MFA). With MFA, users must provide two or more verification factors to access accounts or complete secure transactions. This decreases the likelihood of unauthorized access, even if login credentials are compromised.
The Role of Regulatory Compliance
Regulatory compliance is another critical aspect of ensuring security in B2B transactions. Governments and regulatory bodies have developed strict guidelines that companies are required to follow to protect consumer data and maintain the integrity of financial systems. For example, the Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards that ensures all companies that process, store, or transmit credit card details maintain a secure environment.
Encryption and Tokenization Technologies
As mentioned earlier, encryption and tokenization are at the forefront of security measures in B2B transactions. Moreover, these technologies are constantly evolving. For example, quantum computing poses potential risks to current encryption methods, as its immense computational power could break encryption algorithms that are currently considered secure. In response, researchers are working on quantum-resistant encryption methods to ensure that data remains protected in the future.
Tokenization is evolving to become more versatile, too. While traditionally used for payment card data, businesses are now applying tokenization to other forms of sensitive information, such as account numbers and personal identifiers. This expansion of tokenization helps reduce the risk of data breaches across a broader range of transaction types.
Balancing Security with Usability
One of the ongoing challenges in B2B payments is balancing security with usability. While robust security measures are essential, they can sometimes introduce friction in the payment process, leading to delays or inconvenience for users. For example, while MFA significantly enhances security, it can also add extra steps to the transaction process, which some users may find cumbersome.
To address this, businesses are increasingly adopting user-friendly security solutions that minimize friction while maintaining high levels of protection. For instance, biometric authentication methods, such as fingerprint or facial recognition, offer strong security without the need for passwords or additional verification steps. This enhances security and improves the user experience by making transactions quicker and more seamless.
Benefits of Streamlined B2B Payments
Streamlined B2B payments offer numerous benefits that extend beyond just faster transactions. By leveraging modern fintech solutions, businesses can enhance operational efficiency, strengthen relationships with suppliers and customers, and adapt more quickly to the dynamic demands of the market. Let’s take a closer look at the benefits.
Operational Efficiency and Cost-Savings
One of the most immediate benefits of streamlined B2B payments is the significant improvement in operational efficiency. Traditional payment methods, such as checks, often involve multiple steps and manual processing, which can be time-consuming and error prone. By contrast, digital payment solutions automate much of this process, reducing the need for manual intervention and the associated risk of human error.
For example, automated invoicing systems can generate and send invoices, track payments, and even send reminders to clients, all without requiring manual input. This speeds up the payment cycle and frees up valuable time for staff to focus on more strategic tasks.
Additionally, streamlined payments can lead to cost savings by minimizing late payment fees and reducing the need for paper-based processes. Companies can also benefit from early payment discounts offered by suppliers, further improving their cash flow management.
Enhancing Supplier and Customer Relationships
Another major benefit of streamlined B2B payments is the positive impact on relationships with suppliers and customers. Timely and accurate payments are essential for maintaining trust and reliability in business partnerships. Businesses can strengthen these relationships by ensuring that payments are processed quickly and without errors, leading to more favorable terms and long-term partnerships.
For instance, businesses that consistently pay their suppliers on time are more likely to negotiate better credit terms, discounts, or priority treatment during periods of high demand. Similarly, customers appreciate the convenience and reliability of streamlined payment processes, which can enhance their overall experience and encourage repeat business.
Moreover, the transparency provided by digital payment solutions allows all parties to track the status of transactions in real time. This transparency reduces disputes and misunderstandings, fostering a sense of trust and collaboration between business partners.
Real-Time Payments: The New Norm
Real-time payments are rapidly becoming the norm in B2B transactions, driven by the demand for faster, more efficient payment processing. Unlike traditional payment methods, which can take several days to clear, real-time payments are processed instantly, allowing businesses to receive funds almost immediately. This can be particularly beneficial for small and medium-sized enterprises (SMEs), which often rely on quick access to cash to manage day-to-day operations.
For example, the implementation of the Real-Time Payments (RTP) network has enabled businesses to transfer funds between accounts in seconds, even outside of traditional banking hours. This level of speed and convenience improves cash flow and reduces the need for short-term financing solutions, such as credit lines, which can carry higher costs.
Real-time payments also enable businesses to take advantage of just-in-time payment strategies, aligning payments with the delivery of goods or services. This reduces the amount of working capital tied up in accounts payable and improves overall liquidity.
Additional Benefits: Enhanced Data Insights and Scalability
Beyond operational efficiency and improved relationships, streamlined B2B payments offer additional benefits in terms of data insights and scalability. Digital payment systems often come with advanced analytics tools that allow businesses to track payment trends, monitor cash flow, and identify opportunities for optimization. This data can be invaluable for making informed financial decisions and improving overall business performance.
Moreover, streamlined payment systems are highly scalable, making it easier for businesses to expand into new markets or increase transaction volumes without needing to overhaul their payment infrastructure. This scalability is essential in today’s global economy, where companies must be agile and adaptable to stay competitive.
Adapting to the Tech-Driven Payment Landscape
Adapting to the tech-driven payment landscape is essential for businesses that want to remain competitive and efficient in today’s rapidly evolving market. As fintech innovations continue to reshape how transactions are conducted, companies must integrate these new technologies, choose the right platforms, and prepare for future advancements. Below, we’ll explore how companies can successfully navigate this transition.
Integrating Fintech Solutions
The first step in adapting to the tech-driven payment landscape is integrating fintech solutions into your existing business processes. This often involves replacing or enhancing traditional payment methods with digital alternatives that offer greater speed, security, and convenience. The key is to choose solutions that align with your business needs and customer expectations.
For instance, if your business handles a high volume of transactions, adopting an automated payment processing system can significantly reduce the time and effort required to manage payments. These systems can automatically handle invoicing, payment tracking, and reconciliation, freeing up resources for other tasks.
Moreover, integrating digital wallets and payment gateways can enhance your ability to offer flexible payment options to customers. For example, platforms like Stripe and PayPal allow businesses to accept a wide range of payment methods, including credit cards, digital wallets, and even cryptocurrencies. This flexibility can help you cater to a broader customer base and improve the overall payment experience.
Choosing the Right Payment Platform for Your Business
With so many fintech solutions available, selecting the right payment platform can be challenging. It is crucial to evaluate your options based on several key factors, such as those outlined below.
Scalability
As your business grows, your payment platform should be able to scale with you, handling increased transaction volumes without sacrificing performance.
Security
Ensure that the platform you choose offers robust security features, such as encryption, tokenization, and compliance with relevant regulations like PCI DSS. Security is paramount in protecting your business and customer data.
Integration
The platform should seamlessly integrate with your existing systems, such as your enterprise resource planning (ERP), customer relationship management (CRM), or accounting software. This integration helps ensure a smooth flow of information across your business processes.
User Experience
A user-friendly interface is essential for both your team and your customers. Look for platforms that offer intuitive dashboards, easy-to-use payment portals, and efficient customer support.
Cost
Consider the total cost of ownership, including setup fees, transaction fees, and ongoing maintenance costs. While finding a cost-effective solution is important, it’s equally important to ensure that you don’t compromise on essential features.
Preparing for the Future: What’s Next in B2B Payments Technology?
As technology advances, the future of B2B payments promises even more innovation. A few trends that businesses should prepare for are outlined below.
Artificial Intelligence and Machine Learning
By enabling more accurate fraud detection, automating decision-making processes, and offering personalized payment experiences, artificial intelligence (AI) and machine learning (ML) are set to revolutionize payment processing. For instance, AI-driven analytics can help businesses optimize their payment strategies by predicting cash flow needs and identifying potential risks.
Blockchain and Distributed Ledger Technology
While blockchain is already making waves in the payment industry, its full potential is yet to be realized. In the future, blockchain could enable even faster and more secure cross-border payments, reduce transaction costs, and provide immutable records of transactions that enhance transparency and trust.
Open Banking
Open banking initiatives, which allow third-party providers to access banking data through APIs, are expected to drive greater competition and innovation in the payment industry. This could lead to the development of new payment services that offer businesses more control and flexibility over their financial data and transactions.
Real-Time Payments
The shift towards real-time payments will continue, with more countries adopting instant payment systems. Businesses prepared for this transition can offer faster settlement times and improved cash flow management.
Embedded Finance
The concept of embedded finance involves integrating financial services directly into non-financial platforms, such as e-commerce sites or supply chain management systems. This trend is likely to grow, providing businesses with more streamlined and convenient payment solutions that are fully integrated into their existing workflows.
Taking the Leap: Strategies for Successful Adaptation
Next, let’s take a look at strategies businesses can leverage to adapt to the tech-driven payment landscape successfully.
Stay Informed
Monitor industry trends and emerging technologies regularly to stay ahead of the curve. This knowledge will help you identify opportunities to enhance your payment processes and avoid falling behind competitors.
Invest in Training
Ensure your team is well-versed in the latest payment technologies and best practices. Investing in training will help them make the most of the tools at their disposal and adapt more easily to new systems.
Collaborate with Experts
Partnering with fintech experts or consultants can provide valuable insights and guidance as you navigate the complexities of integrating new payment technologies.
Start Small, Scale Fast
Begin by piloting new payment solutions on a small scale, allowing you to assess their impact before rolling them out more broadly. Once you’ve identified the right solutions, scale them quickly to maximize their benefits.
Focus on Customer Experience
As you adopt new payment technologies, keep the customer experience at the forefront of your strategy. Ensure that any changes you make enhance convenience, security, and satisfaction for your customers.
Modernize Your B2B Payment Strategy with Charter Capital
While it’s true that invoice factoring has been around for ages, it’s one of the many areas impacted by the evolution of technology in B2B payments. At Charter Capital, these advancements allow us to provide instant approval, offer same-day payments, and give you access to your account 24/7. We also use it in customer-facing transactions, allowing us to collect balances quicker and provide a better payment experience for your customers. If you’re ready to modernize your B2B payment strategy, request a complimentary factoring quote.
Think your business excels at accurate bookkeeping? It’s not as easy as it sounds, and even small errors or oversights can cause major issues as your business grows. On this page, we’ll review some of the most common bookkeeping mistakes that small businesses make, why it’s worthwhile to correct them, and actionable steps you can take right away to shore things up.
1. Lack of Regular Reconciliation
Regular reconciliation is a crucial component of financial management. When businesses fail to reconcile their accounts regularly, they risk overlooking discrepancies, which can lead to significant financial issues. For instance, if a transaction is recorded incorrectly or missed, it can create errors in financial statements, which may lead to poor financial decisions and potential cash flow problems.
Understanding Bank Reconciliation
Reconciliation involves comparing the company’s financial records with external records from banks, suppliers, and customers. This process allows businesses to identify and correct errors, ensuring records accurately reflect the business’s financial position.
How to Address a Lack of Regular Reconciliation
To avoid the issues associated with a lack of regular reconciliation, follow a standardized process and leverage financial tools, as outlined below.
Schedule Regular Reconciliation: Set a monthly schedule for reconciliation to catch errors early.
Use Accounting Software: Tools like QuickBooks, Xero, or FreshBooks can automate parts of the reconciliation process, making it easier and more accurate.
Reconcile All Accounts: This includes bank accounts, credit cards, and even petty cash.
Review Statements Carefully: Look for discrepancies in amounts, dates, and descriptions.
Mastering Reconciliation: A Key to Financial Health
Regular reconciliation is a cornerstone of good bookkeeping practices. By systematically comparing your business checking account records with external statements from banks and vendors, you can ensure your bookkeeping is accurate and up-to-date.
For many small business owners, the task of reconciliation may seem daunting, but it’s essential for maintaining financial health. By catching errors early, regular reconciliation helps you avoid costly mistakes and ensures that you have a clear picture of your cash flow. A professional bookkeeper or accountant can streamline this process, saving you time and money while enhancing your ability to make informed decisions. Incorporating reconciliation into your bookkeeping system will keep your books accurate, helping you manage your business more effectively and focus on growth.
2. Not Keeping Accurate Records
Not keeping accurate records is a common mistake that can seriously affect small businesses.
Why Accurate Records Are Essential
Keeping accurate records is essential for many reasons.
Financial Clarity: Accurate records provide a clear picture of the company’s financial situation, which allows the owner to make informed decisions.
Tax Compliance: Proper records are necessary for tax reporting. Inaccurate or incomplete records can lead to errors on tax returns, which can result in fines or audits.
Cash Flow Management: Accurate records help businesses track cash flow. This is essential in ensuring the company has enough funds to cover expenses and invest in growth.
Loan and Investment Readiness: Lenders and investors require detailed financial records to assess a business’s viability. Without accurate records, it can be difficult to secure financing.
How to Address Inaccurate Records
Apply the following tips to avoid the pitfalls of inaccurate records.
Leverage Accounting Software: Besides helping with reconciliation processes, accounting software can help track income, expenses, invoices, and other financial transactions.
Stay Consistent: Update records regularly, ideally daily or weekly, to ensure they reflect current financial status.
Keep All Receipts and Invoices: Store physical copies of all financial documents, including receipts, invoices, and bank statements.
Train Staff: Ensure that anyone involved in record keeping understands the importance of accuracy and follows established procedures.
Conduct Regular Reviews: Review financial records periodically to identify and correct errors.
3. Mixing Business and Personal Finances
Mixing business and personal finances may seem natural. After all, 78 percent of small business owners use their own funds to launch their business, according to the U.S. Chamber of Commerce. Plus, more than half dip into their personal funds to cope with business challenges, according to the Bipartisan Policy Center. But, this is not a good practice and can create major issues as the business grows.
Why You Shouldn’t Mix Business and Personal Finances
Comingling finances can create several issues for businesses and business owners.
Lack of Financial Clarity: Mixing finances makes it difficult to determine a business’s profitability. Personal expenses mingled with business transactions obscure the true financial picture, leading to poor financial decision-making.
Tax Complications: If your business is a separate entity from you, as is the case with LLCs and corporations, the IRS requires you to keep separate financial records. Failure to do so can create tax issues for your business.
Limited Liability Protection: Mixing personal finances with corporate finances can make the line between them murky, which may put personal assets at risk if the business faces legal issues.
Difficulty in Securing Financing: Lenders and investors need clear records to assess business viability. Mixed finances make it challenging to present a credible financial history.
Best Practices to Avoid Mixing Business and Personal Finances
To avoid the issues associated with comingled funds, businesses should ensure accounts are always kept separate.
Open Separate Bank Accounts: Maintain distinct checking and savings accounts for business and personal finances.
Use Dedicated Credit Cards: Utilize business credit cards exclusively for business purchases and personal cards for personal purchases.
Leverage Accounting Software: Use your accounting software to keep track of all business finances so it’s clear they are separate.
Track Expenses Diligently: Ensure every business expense is documented and categorized separately.
Pay Yourself a Salary: Establish a regular, documented salary or owner’s draw to keep personal withdrawals clear and consistent.
Log Loans Appropriately: If you choose to use your personal funds for your business, ensure they’re logged as loans with the company and that repayment is tracked as such to create clear lines of distinction.
Personal and Business Finances: Maintaining Clear Boundaries
Mixing personal and business finances is a frequent mistake among small business owners, leading to significant challenges at tax time. To avoid this, maintain separate accounts. Open a dedicated business checking account for all business transactions. This separation is critical for accurate bookkeeping, preventing common errors such as misclassifying transfers as income or reimbursable expenses.
When personal and business expenses are mingled, it complicates tax deductions and increases the risk of accounting errors. By keeping clear boundaries, you can avoid potential financial pitfalls and ensure your bookkeeping is accurate. A professional bookkeeper or accountant can help you establish these boundaries, ensuring that your financial records are clear and compliant. This practice not only saves time but also protects your business from costly errors.
4. Neglecting to Back Up Financial Data
Neglecting to back up financial data is a critical mistake that can have catastrophic consequences for a small business.
Why Backing Up Financial Data is Crucial
Backing up financial data is essential for a variety of reasons.
Protection Against Data Loss: Financial data can be lost due to hardware failures, cyberattacks, accidental deletions, or natural disasters. These losses can be irrecoverable without backups, putting the business at risk.
Business Continuity: Having backups ensures that a business can quickly recover from data loss incidents, minimizing downtime and making it easier for companies to maintain operations.
Regulatory Compliance: Many industries have regulations requiring businesses to maintain and protect financial data. Failure to back up data can result in non-compliance, resulting in fines and legal issues.
Trust and Credibility: Clients and partners expect a business to manage their data responsibly. Regular backups demonstrate a commitment to data security, which can enhance trust and credibility.
5. Failing to Plan for Taxes
Failing to plan for taxes is a common mistake that can lead to significant financial strain for small businesses.
Why Planning for Taxes is Essential
Because taxes are a significant expense for most small businesses, failing to plan for them can have major consequences. A few of the most common are outlined below.
Avoiding Surprises: Without proper planning, businesses may face large, unexpected tax bills that can disrupt cash flow and financial stability.
Minimizing Tax Liability: Effective tax planning helps businesses identify deductions, credits, and strategies to reduce overall tax liability.
Ensuring Compliance: Proper planning ensures businesses comply with tax laws and regulations to avoid penalties and audits. This is important, as the IRS can impose substantial fines for late or inaccurate filings.
Improving Financial Forecasting: Understanding tax obligations helps businesses develop more accurate projections and budgets, which is essential for making informed business decisions.
6. Not Seeking Professional Help When Needed
Failing to seek professional help when needed can hinder your business growth and financial health. Professional assistance in areas like accounting, tax planning, and legal matters can provide critical support and guidance.
Why Seeking Professional Help is Important
Building a solid network of financial pros to support your business can prove invaluable for many reasons.
Expertise and Knowledge: Professionals bring specialized knowledge and expertise that can prevent costly mistakes and optimize financial management.
Time Savings: Outsourcing complex tasks allows business owners to focus on core activities to increase overall productivity.
Compliance and Risk Management: Professionals help ensure businesses comply with regulatory requirements and avoid legal issues.
Strategic Planning: Experts can provide valuable insights for strategic planning that helps businesses make informed decisions about growth, investments, and risk management.
How to Weave Professional Assistance into Your Operations
Each business may benefit from partnering with different professionals or leveraging unique services.
Identify Key Areas for Assistance: Determine which aspects of the business could benefit from professional help, such as general bookkeeping, tax planning, business funding, or legal.
Choose the Right Professionals: Look for certified, licensed, and experienced professionals who understand the needs of your industry.
Network and Ask for Referrals: Seek recommendations from other business owners or industry associations to find reliable professionals.
Evaluate Cost vs. Benefit: Consider the potential return on investment when hiring professionals. Where there is a cost involved, the long-term benefits often outweigh the expenses.
Avoid Common Bookkeeping Mistakes with Invoice Factoring
Invoice factoring isn’t designed to help you avoid bookkeeping mistakes. It’s a form of business funding that provides you with instant cash by accelerating payment on your B2B invoices. However, in addition to providing cash instantly, the process helps you avoid some of the most common bookkeeping mistakes. For instance, your factoring company will verify the accuracy and validity of your invoices and provide records for all the invoices you factor, which aids in reconciliation. Your factoring company will also take over the collections process for you, operating much like an outsourced collections department. Plus, you’ll benefit from cash injections as needed, which can be helpful if you need to purchase accounting software, pay for professional help, or cover any other expense associated with improving your bookkeeping.
As a top-rated factoring company with more than two decades of experience, Charter Capital makes factoring easy with same-day funding, no long-term contracts, and competitive rates. To take the first step toward a brighter financial future, request a free factoring quote.
Starting a business is not for the faint of heart. One in five fails within the first year and half close within five years, Investopedia reports. Less than one-third make it to ten years. While these statistics may seem grim, most of these closures can be directly attributed to just a few common startup mistakes. On this page, we’ll walk you through some entrepreneurial challenges you’ll likely face in the early years and how to avoid the business founding mistakes that trip most people up.
1. Having a Product or Service That Doesn’t Solve a Problem
You may see the value in what you’re offering, but do others? Often, people close to a business don’t realize there’s no market for their product or service. Think critically about what happens when you tell others unfamiliar with your company what you do.
Do people seem confused by the concept?
Do people stay mostly quiet or clam up beyond giving basic congratulatory messages?
Do you spend a lot of time explaining what you do or how it works?
If so, there might not be a market for your product or service. Consider doing more market research to see if there is a way you can adjust your offering to fill an unmet need.
2. Following Bad Advice
Everyone will have advice on how you should run your company. However, most people will have no experience running a successful startup. Skip the advice from well-meaning friends and family.
It may be helpful to connect with other entrepreneurs but remember that they’re also experiencing a large learning curve. Even if someone has found something that works for them, that doesn’t mean their solution is viable in the long run or isn’t creating more problems they haven’t discovered yet. Take this advice with a grain of salt.
If you’re stuck, defer to an expert. That may mean bringing in finance pros, tax specialists, lawyers, consultants, and more. Also, keep a pulse on your customers. While they may not be able to help you run a profitable business, they are experts in knowing what they want and need.
3. Not Scheduling Downtime
The average CEO works close to 12 hours per day, according to Harvard Business Review. In the tech industry, CEOs clock 14-hour days, First Round reports. People can’t sustain this kind of momentum in the long run. It impacts stress and sleep, which often leads to needless mistakes and burnout.
You may be thinking that the extra hours are essential. You have work to get done. However, the hard truth is that you probably aren’t getting more done when you put in extra hours. Productivity declines sharply at the 50-hour mark. People who work 70 hours per week are no more productive than they would have been if they’d worked 55 hours, CNBC reports.
Schedule your days in a way that ensures you get time away to rest and rejuvenate. Your performance, and therefore likely business performance, will be better as a result.
4. Hiring Too Fast
First-time founders are usually eager to begin hiring. Bringing in extra bodies can help your business grow and allow you to delegate more tasks. However, when businesses hire too fast, they often wind up with people problems such as:
Employees who aren’t a good fit for their role.
A lack of culture fit.
Slow or poor onboarding and training.
More employees than needed.
Bring on newcomers strategically. Evaluate outsourcing specific tasks or processes before creating full-time roles. When you do hire, choose the roles you fill carefully and try to resist the urge to hire someone simply because they’ve worked at a startup before. Evaluate each candidate’s skills, knowledge, and culture fit before moving forward.
5. Not Defining Job Roles
You’ve probably seen job descriptions, or maybe even written ones, that ask for a “rockstar” or “Jack of all trades.” This tends to be code for: “I want someone who can do everything.” Unfortunately, nobody is good at everything, and those who try to do it all for you will wind up burning out.
Instead, create clearly defined job roles. This will make it easier to find the right person for each role, ensure their deliverables are understood, and help you measure their success in the role.
6. Overestimating Revenue
It isn’t easy to gauge how much money a business will make when it’s just getting started. While you can leverage market data and compare similar businesses, you’re still using figures generated by established companies to create your projections. Generating brand awareness and developing an audience takes a considerable amount of time. During this time, you’re also developing processes and building the infrastructure to do business, which may impact how much work you can take on and the resources you have to apply to growth initiatives.
Expect a very slow start and give your business time to ramp up. If you’re unsure what this looks like for your industry or business, connect with a consultant who does.
7. Forgetting to Build Scalability into Processes
Startups tend to develop processes as they go. For instance, you may be managing several departments as a founder. That means you’ve probably set up all emails and online lead generation forms to forward directly into your inbox. You process these things using your preferred methodology, and then they “evaporate.” There’s no trail to show what you’ve done. All information is stored in your head. Nobody but you knows what happened or what else the person might need. This is common with most business processes in a startup. It creates major headaches as the business grows and more team members are brought in.
As you develop your internal procedures, consider how things will need to be handled as you grow. Try to develop processes that will scale with you and get the systems in place early. That means you’ll probably need tools like customer relationship management (CRM) and accounting software. As an added benefit, you can use these tools to begin automating many of your processes now. It’ll save you time and allow you to focus on growing your business.
8. Underestimating Costs
Remember when you moved into your own home for the first time? There were so many things to buy. The costs, from linens to cleaning supplies and paying utilities, really added up. It’s the same way when you’re starting a business.
Make a detailed list of potential expenses and carefully check your estimated costs. It’s also helpful to leave yourself a cushion to ensure you have cash for unexpected expenses and build an emergency fund.
If you’re planning to bring on freelancers or independent contractors, make sure you understand how that affects your budget, too. While you won’t have to carry the expenses of traditional employees or directly pay a portion of their premiums, health insurance for independent contractors can be pricey, and contractors often charge higher rates to help offset those and other self-employment costs.
9. Not Managing Cash Flow Effectively
The top reason businesses fail is because their money ran out, Investopedia reports. Note that this is an entirely different problem than a lack of profitability. If you have expenses that need to be paid but won’t have the cash for another month when your clients pay their invoices, your business will be in trouble.
Perform cash flow projections and monitor your cash flow at least weekly. Maintain your cash cushion and set up a backup funding source like invoice factoring to ensure you can close cash flow gaps before they become a problem.
10. Growing Too Fast
Rapid growth is often viewed as a champagne problem, but it can be quite serious because you’re trying to cover today’s higher expenses with yesterday’s lower revenue. You may not have the infrastructure or resources to ramp up quickly either. This is when companies start having problems like coming up short at payroll, not having cash to procure supplies, and feeling tempted to hire without a strategy. Customer satisfaction often falters, too, which can damage your company’s reputation.
If cash flow issues are holding you back from taking on more work, your reserve and backup funding can allow you to push forward. If you’re missing the processes and infrastructure to level up, limiting the amount of work you accept may be better until you’re ready for it.
11. Failing to Pivot
You probably started your business with a vision and determination to make things work. Perseverance is crucial, but knowing when to let go of your plans and pivot is equally important.
Monitor the market and how people respond to your offerings, finances, and organizational processes. You will need to refine these strategies as your company grows. It’s not a failure to change things up. It’s resilience, and it can help ensure your business stands the test of time.
Navigating Startup Challenges: Essential Mistakes to Avoid
For every entrepreneur venturing into the world of startups, understanding and avoiding common startup mistakes is crucial for laying the foundation of a successful business. From the initial excitement of launching a new business or small business, many founders often overlook the significance of conducting thorough market research, creating a robust business plan, and developing a marketing strategy that resonates with prospective customers. One of the biggest mistakes startups make is failing to monitor cash flow and neglecting continuous feedback, which can lead to a lack of product-market fit and, ultimately, the startup’s failure Additionally, you need to make a business plan that addresses startup growth, customer experience, and the right team composition to ensure the success of your business. Learning from the mistakes and pivots of others, making any needed adjustments, and providing a thorough understanding of the market need are essential steps to avoid the common pitfalls that lead to the statistic that 9 out of 10 startups fail. By focusing on these key areas, new business owners can significantly reduce their chances of making common startup mistakes, thereby enhancing the likelihood of their startup’s growth and long-term viability.
Avoid Common Startup Mistakes with Invoice Factoring
Invoice factoring provides instant payment on your B2B invoices, so you can close cash flow gaps and have money as needed for crucial expenses like payroll or ramp-up. It also helps address other issues, such as the time you spend chasing invoices. Plus, it can be a very flexible funding solution when you partner with a factoring company like Charter Capital. Request a complimentary rate quote to get started.
Many people will say that the keys to business success include discipline and perseverance. While these are essential characteristics for business leaders, they’re traits that make the person more successful, not necessarily the business they serve. This page will focus on the trifecta for business: dependable operations, positive customer relations, and mindful financial management. You’ll learn why each matter and get strategies to shore things up in each area.
Key Strategies for Achieving Long-Term Business Success
Every successful business understands that the key to success in business lies in a multifaceted approach, blending organizational skills, excellent customer service, and an understanding of both risks and rewards. As a business owner, whether you’re nurturing a new business or striving to keep a running business thriving, it’s essential to grasp these crucial keys to succeed in business. An important key to success is keeping detailed records, allowing for a clear understanding of your business’s financial standing, which is critical to making informed decisions. Moreover, offering great customer service is not just an add-on but a cornerstone of a successful business, helping you achieve a competitive advantage and fostering business growth. Every business must also recognize the importance of the right people – those who share your vision and are dedicated to helping your business grow. These individuals are instrumental in creating a strong team that can respond to the various challenges facing businesses today. In addition, a successful business owner is always looking for ways to improve, whether by enhancing the customer experience, staying on top of organizational tasks, or offering high-quality products or services. Taking calculated risks and making some sacrifices are often part of the journey towards business success. For instance, embracing new technologies or innovative business strategies can be critical factors in helping your business grow and stay ahead in a competitive market. Moreover, understanding labor statistics, market research, and customer feedback provides valuable insights, helping you make strategic decisions that align with long-term goals and create a clear path for growth. It’s also crucial to prepare for potential challenges, whether from business activities or external factors, ensuring your business can survive and from business activities or external factors, ensuring your business can survive and sustain it successfully over time. Remember, the first five years can be the most challenging; however, with the right approach, you can create long-term success, making your company a beacon of success and a testament to the power of dedication and strategic planning.
1. Scalable and Dependable Operations
Developing scalable and dependable operations is one of the biggest keys to succeeding in business. This category includes all activities related to planning, organizing, coordinating, directing, and controlling all aspects of your business required to produce goods or services. While many businesses think of this in an administrative capacity, it spans across all departments, from procurement to manufacturing, marketing, and distribution. That means the related expenses are likely to comprise the bulk of your total expenses and will, therefore, considerably impact overall profitability.
Develop Processes to Enhance Operational Efficiency
Most businesses develop processes as they go to fill an immediate need. For instance, you might wonder if you have enough working capital to order more supplies and ask your administrative assistant to check your account. This task then becomes the administrative assistant’s duty, whether or not she has a firm grasp on cash flow, payables, or receivables, and you’re likely to stick with it until you face a disastrous outcome that necessitates change or your business expands enough to hire a bookkeeper.
Small businesses should reevaluate their processes regularly and identify what can be done better or more efficiently and if the current process will scale with the business as it grows.
For instance, at least 30 percent of activities in 60 percent of jobs can be automated, according to McKinsey. Keep a critical eye on these aspects as you review operational procedures to allow your staff to work more efficiently or produce more without becoming overburdened as your business grows.
Have Plans for Overcoming Operational Challenges
Similarly, businesses should have documented plans that cover what to do if specific challenges arise. If you don’t already have a business disaster plan or continuity plan covering supply chain disruption and natural disasters, get one in place now. This will ensure most adverse events don’t impact your operations and that your business recovers quicker when an impact is unavoidable.
Embrace Technology to Boost Operations
Nearly nine in ten small businesses report increased efficiency due to technology platforms, according to the U.S. Chamber of Commerce. Keep an open mind about adding new digital tools that may help your business work more efficiently, reduce errors, or produce better results, especially if they make it easier to scale as you grow.
2. Positive Customer Relations
Developing and maintaining strong customer relations is crucial to growth and is one of the crucial keys to succeeding in business because you need to retain customers to increase your customer base, and happy customers can grow your business through referrals and reviews.
Address Customer Concerns Efficiently
Customer trust is built through repeated positive interactions: those you have directly with customers and those you see reported by other customers. However, resolving concerns isn’t enough. Customers expect fast resolutions. Maximum response times, per Zendesk, are:
Email: 12 hours or less
Social Media: 5 hours or less
Live Chat: 1 minute or less
Collect and Act Upon Customer Feedback
Proactively collect customer feedback and act on it to ensure your customers feel heard and respected. Use the information you gain from customer reports to improve your offerings.
Foster Customer Loyalty
Loyal customers are more likely to refer others, spend more, and stay with your company longer. Addressing concerns and requesting feedback will help in this area. You can also boost loyalty through thorough onboarding, continuous nurturing, and dedicated loyalty programs.
3. Mindful Financial Management
While most businesses understand that effective financial management is a key to business success, many fail to implement strategies that contribute to this.
Predict Cash Flow with Accuracy
Know how to produce a cash flow forecast or procure software that will do it for you. Accurate forecasts will allow you to see when your business might face a cash flow shortfall so you can take corrective action before you run out of cash. It can also help you avoid taking on high-interest loans that might otherwise bury your business in debt.
Implement Financial Strategies to Boost Cash Flow
Cash flow is comprised of cash inflows, such as your customer invoices, and cash outflows, such as your vendor payments. You can accelerate and increase inflows or slow and decrease outflows to improve cash flow. It’s important to review all your related processes to ensure your business maximizes cash flow.
For instance, one method to boost cash flow is to speed up customer payments. You can do this by:
Shortening the payment window
Sending invoices as soon as goods or services are delivered
Making it easy for customers to pay
Sending reminders as the due date approaches and after
Maximizing your working capital and performing cash flow forecasts can help your business avoid everyday shortfalls, but sometimes unexpected events can derail your plans, too. For instance, equipment may break, or a customer might not pay as planned. It’s essential to prepare for these issues, too.
Your best defense is to have a business emergency fund ready. Most small businesses cannot afford to set one up all at once. If your business is in this situation, consider treating yours like a bill and set up recurring payments to help build your cushion a little at a time.
Having a backup funding source ready to go is also a good idea. This can ensure you’re not tempted to take out a loan with bad terms in the event of an emergency. Invoice factoring is often ideal in these cases because you can set up your account and not use it unless you need it. It’s also quite flexible. You’re in control of when you factor and which invoices you choose, so you can keep more money in your pocket and get the right level of funding for any given situation.
Bolster Your Business Growth with Factoring
Whether you need working capital to implement any of the ideas outlined here or you want to ensure you can accelerate inflows and have a backup source of funding whenever needed, we can help. To get started, request a complimentary Charter Capital factoring quote.
“The most powerful ingredient in business is positive momentum. Get it and keep it.” Although this powerful quote can’t be attributed to any one person, the sentiment stands. Scaling up a business is challenging. Leveraging the momentum you’ve built makes it easier and opens new opportunities.
But, what does momentum in business look like, and how can you capitalize on momentum to amplify the results you’re getting? Give us a few minutes, and we’ll walk you through these concepts and provide some business growth strategies to get you started.
Recognizing the Right Time to Scale Your Business
Proven Success: If your business consistently hits its targets and shows stable growth, it’s a sign you’re doing something right.
Rising Demand: An unmistakable sign is when the demand for your product or service consistently exceeds your current capacity.
Replicable Processes: When you can standardize and replicate business operations efficiently across different scenarios, you’re ready.
Financial Health: Examine your balance sheet. If revenues are steadily increasing and you have a buffer to absorb potential scaling challenges, it might be time.
Skilled Workforce: If you’ve got a team that’s efficient, adaptable, and can handle the challenges of expansion, you’re a step ahead.
Feedback and Data: Your customers’ feedback and data analytics might be suggesting a shift. If there’s a consistent request for expansion or more offerings, heed the call.
Scaling is a big decision, but recognizing these signs can offer clarity on when it’s the right move.
1. Strengthen Your Core Business Procedures
It’s easy to have rose-colored glasses when scaling up a business, as if all your problems will evaporate with increased revenue. In reality, your problems will scale with you. Minimize the risk of this by getting the right processes and people in place now.
Remain True to Yourself and Your Mission
We know that authenticity is vital for businesses. Customers are willing to pay more for your products or services when they believe you’re authentic, as HBR reports. It’s essential in building trust and when attracting and retaining customers. It also makes a massive difference in how you and your team feel about the work that you do.
Businesses must make decisions at the speed of light when a high-growth period kicks in, and we don’t always see how we’re slipping away from our core values until we’ve ventured so far off our intended path that we can’t even tell how we arrived there. It may start as compromising on the quality of raw goods to ensure supplies arrive on time or to stretch a budget and ultimately result in a subpar product. Or, maybe it’s a shortcut in your customer service processes that diminishes the customer experience. Consider whether the new process or item aligns with your goals as you face these decisions. Don’t compromise if it doesn’t.
Focus on Building a Solid Team
Have a strategy in place for recruiting a solid team. Identify which roles you’ll need to fill and the criteria you’ll use to determine your readiness to hire beforehand. It may also be helpful to draft your job descriptions now while you have time, though expect to revamp them later as your needs for the role become clearer.
Invest in Your Employees
As you’re hiring, make sure you’re offering competitive wages and bringing employees into an environment where they can do their best work. Because effective team building has been shown to improve teamwork, morale, and more, planning your strategy for this and employee development in advance is a good idea.
2. Leverage Technology and Innovation
Leveraging technology and innovation in business is crucial to success. It can help stretch your dollars when scaling up a business and ensure your money is going where it will have the greatest impact.
Make the Most of Modern Tech Tools
There are a multitude of online tools that can streamline processes and save your business money. For instance, investing in a project management tool increases the odds of reaching your goals by 21 percent, according to the Project Management Institute. Bookkeeping and accounting tools can make managing your money easier and getting paid faster. You can even boost sales by 29 percent by implementing a customer relationship management (CRM) platform, per HubSpot data.
While there may be upfront costs as you invest in new tech, it usually saves you money in the end through increased efficiency and sales.
Consider Outsourcing Certain Tasks
Outsourcing benefits businesses in lots of ways. For instance, you may outsource your marketing to ensure an expert handles it and that you get maximum ROI. Or, you might outsource customer service to provide customers with a broader range of options and save money. These options also allow you to focus more on the daily aspects of running your business.
One area business owners often overlook when it comes to outsourcing is additional services provided by their current vendors and partners. For example, if you work with an invoice factoring company like Charter Capital, your payments are collected for you. You’ll also qualify for free client credit reports, so making informed decisions about how much credit you extend to your customers is easier.
3. Emphasize Customer Experience
Businesses that focus on customer experience (CX) achieve up to a 15 percent increase in revenue, according to Zippia. Their customers are willing to pay 16 percent more, too. Focusing on CX while your business is on the smaller side allows you to replicate great experiences as you grow, so your business scales faster and more solidly.
Create Comprehensive, Updated Customer Profiles
Earlier, we talked about investing in a CRM. This is where it really starts to pay off. A CRM that’s loaded with customer data will help you improve virtually all areas of your business. For instance, you can track their interest in products and services, market to specific groups, track and improve your sales cycle, and more.
Ensure a Stellar Customer Service Setup
Consider the whole customer journey as you set up your customer service processes.
Onboarding and Training: Ensure customers understand how to use your products or services.
Self-Service Tools: Provide customers with tools they can access 24/7 to learn more about your offerings or troubleshoot issues, such as video tutorials, user guides, and chatbots.
Reactive Customer Service: Ensure customers can easily reach you through their preferred channel if they have an issue. Phone, email, social media, and live online chat may all deserve a place in your strategy.
Proactive Customer Service: Request feedback from your clients and ask how their experience is going. This step is vital because not all dissatisfied customers will complain. Plus, it shows your clients you care, which improves the experience even more.
4. Understand Your Business Financials
Cash is tight when you’re scaling up a business. You have new and increased expenses that you must pay with the money you earned yesterday, when your revenue was lower. This is why cash flow issues, not a lack of profit, hurt most growing businesses. Address a few key areas to ensure you have enough cash on hand while you’re scaling.
Know What’s Driving Your Financial Decisions
You’ll need to do some soul-searching or work with an accountant to determine what’s driving your financial decisions and if you’re serving your company’s best interests. One common issue in growing businesses is the tendency to put off uncomfortable truths or difficult situations. For instance, you might know money is tight and have an idea that you may need to do something about it, but put it off until you can’t make payroll. This can be a slippery slope because businesses in this situation often have knee-jerk reactions and accept any funding they can get in time, even if it’s costly or damages the business in the long run.
Your financial behavior may be different. Nevertheless, it’s always a good idea to examine how you’re spending, managing, and obtaining funds to see if there are patterns you can improve.
Evaluate Your Trade Credit Terms
Businesses don’t always recognize that they’re extending credit when invoicing clients after goods or services are delivered. However, if you invoice, that’s precisely what you’re doing. Unfortunately, businesses sometimes take advantage of this system by paying late or not paying until right before the due date. A growing business cannot withstand this kind of strain for long. Reevaluate your payment terms to see if you can accelerate payments by shortening the payment window, adding late fees, or leveraging other tactics.
Explore Invoice Factoring as a Cash Flow Solution
If you can’t adjust your trade credit terms or doing so isn’t enough, invoice factoring may be your ideal cash flow solution. Instead of relying on your clients to pay faster, you’ll sell your invoices to a factoring company like Charter Capital at a discount. You’ll receive most of the invoice’s value upfront and can spend the cash in whatever way makes the most sense for your business. Then, you’ll receive the remaining value of the invoice, minus a small factoring fee, when your client pays their invoice.
This approach works particularly well for growing businesses because it’s not a loan. Therefore, you’re not subject to the same rigid qualifications. Most businesses are approved. It also doesn’t result in debt that your business must pay off like a loan does. Plus, you can set factoring up in advance and not use it until needed. It helps eliminate knee-jerk financial decisions because of this.
5. Enhance Your Marketing Efforts
It may seem odd to double down on marketing efforts when business is going strong, but this is the perfect time. You have something happening right now. Maybe demand increased, a competitor shut down, or some other condition changed that is accelerating your business growth. Most of these situations also mean that any marketing initiatives you kick off now will be more effective than usual and allow you to capture an even greater slice of the market.
Experiment More in Marketing and Advertising
Try funneling some of the additional revenue into marketing and advertising channels you haven’t tried yet or leveraging a new approach to channels you’ve had lackluster results with in the past.
Encourage Your Customers to Do Your Marketing
Word-of-mouth marketing is one of the most powerful forms of marketing. Your influx of business means you have a whole new group of people who can help spread the word. On a basic level, you can increase word-of-mouth marketing simply by asking customers to leave reviews for your business online. Then, build a formal referral program. These programs incentivize customers to refer their friends, family, and associates to your company. Some brands offer customers a discount or free item for each referral, while others pay cash rewards.
Collaborate with Another Brand for Mutual Benefits
A referral partner program works similarly to a customer referral program. In this case, however, it’s usually other businesses or professionals sending referrals rather than your clients. It’s a very effective way to get more leads or sales and can easily be launched at the same time you begin your referral program for customers. Formal factoring referral programs like those offered by Charter Capital support partner relationships that generate qualified leads while delivering real financial value.
The more you network with other brands, the more you’ll likely find co-marketing opportunities. For instance, you may be able to work with a brand that shares your audience on webinars, research publications, podcasts, or blogs.
Successfully Scale Your Business With the Help of Charter Capital
If you’re struggling to bridge cash flow gaps during rapid growth or want to kick off some of the initiatives covered here but lack the working capital, invoice factoring from Charter Capital can help. To learn more or get started, request a free rate quote.
Profit is typically measured in three ways. Each offers a different view of your business performance.
