A large demand that arises unexpectedly, a special date that needs to be better explored, the need for immediate hiring: there are several reasons that can lead a business owner to need an amount that they often do not have immediately available in the company's cash flow. In these situations, one alternative used to resolve unforeseen events, common in the routine of a business, is the anticipation of receivables.
The anticipation of receivables consists of a type of credit operation that aims to transform sales made on credit into immediate cash. Normally carried out by banks and financial operators, which assume the securities that the company has to receive in the future, this operation anticipates the resources by charging an interest rate, which is compatible with the time that the bank will need to wait for the securities in question to be cleared. Among the available options, invoices, credit card installments and post-dated checks are the most common securities that can have their payments advanced.
Read also: FINANCIAL REPORTS – WHAT ARE THEY AND HOW TO ANALYZE THEM?
Content
How do I request an advance payment?
The benefits of receivables anticipation
Beware of the risks of anticipating receivables
How do I request an advance payment?
Planning is always the beginning of everything. Therefore, it is important to develop a financial plan to be adopted in the months following the advance, since it will be necessary to keep all costs mapped out so that no company commitments are left pending. After that, it is necessary to choose which securities will be received in this advance. Payments related to credit cards, invoices and post-dated checks from reliable customers are the best choices, since they are the most likely securities in terms of guaranteeing the receipt of the amounts in question.
After choosing the securities, it is recommended to check the interest rates and fees to be charged on the advance amount, in order to avoid unpleasant surprises regarding the amounts disbursed for the operation. When making the advance, it is also important that the securities written off in the credit operation are written off in the financial planning. This update guarantees security and minimizes the risk of compromising funds that have already been received.
The benefits of receivables anticipation
Among the main benefits of receivables anticipation are the absence of a long-term commitment to be paid and lower interest rates compared to what banks and financial canadian cfo email list institutions charge for loans, for example. In addition, the entrepreneur will not need to withdraw money from his business's cash flow to pay off financing installments, which is one of the most attractive advantages of this type of credit operation.
Beware of the risks of anticipating receivables
The entrepreneur must be very careful before requesting an advance on receivables. This is because the interest rate to be charged by the bank for this operation must be lower than the interest charged for other lines of credit made available by the financial institution. It is also necessary to be aware of the real amount that will be discounted by the bank in relation to the advanced amount, since fees, such as IOF, are charged in this type of operation.
In view of this, the best way to make an advance payment without falling into the trap of interest and fees is to create a cash flow projection. This action is important because it helps the entrepreneur understand how much money will actually be advanced and whether or not this amount will be needed in the future of the business. After all, creating a problem for the future due to a poorly planned action in the present is never the best way to solve a company's financial problems.