Most technology consulting companies have high payroll liabilities. This is because technology staffers tend to have specialized knowledge that commands high salaries. Meeting payroll can be difficult at times because most commercial customers pay their invoices in net 30 to net 60 days. This means that the technology consulting company needs to cover its expenses from its own resources while waiting to get paid. Companies that don’t have substantial resources can sometimes run into working capital problems.

One way to address this situation is to request faster payments from customers. While this strategy can be effective, it also has a serious drawback. It leaves your cash flow at the mercy of your customers who can choose to pay slowly and any time. For many companies, a better strategy is to deploy invoice factoring.

Invoice factoring solves this problem by providing a working capital advance that uses your slow paying invoices as collateral. This provides your technology consulting firm with the business financing it needs while also relieving it from the pressures of slow paying customers. To deploy a factoring solution at your firm you will need to partner with a factoring company. The factoring company handles the advances and also settles the transactions once your customers pay on their usual schedule.

The most important requirement to qualify for an accounts receivable factoring line is to have customers with good commercial credit. This is important because factoring companies consider your customers credit to be the most important collateral that your company has. Aside from that, your company must also:

1. Invoice for completed and accepted work
2. Have invoices that are clear of any encumbrances
3. Be free and clear of any legal and tax problems

Most factoring financing lines are designed to be flexible and to grow with your business. The line will dynamically adapt and grow with your increasing revenues, provided that your company meets the factoring requirements. Because of this, factoring can be an ideal financial solution for growing technology consulting firms that have working capital problems.

It’s not uncommon for consulting companies to run into cash flow problems at one time or another. Many companies extend payment terms to their customers and give them up to 60 days to pay their invoices. However, the consulting company has a number of liabilities that need to be paid on a regular basis. One example of such a liability is salaries, which are paid on a weekly or biweekly basis. This can create a cash flow problem for companies that don’t have the financial resources to meet their expenses while waiting to get paid.

A way to solve this problem is to ask for quicker payments. While this can solve the problem, it also has a serious drawback. It leaves your cash flow at the mercy of your customers who can choose to pay slowly at any time. For many consulting companies, a better solution is to use invoice factoring.

Factoring solves this problem by providing an advance to your company and using your slow paying invoices as collateral. This provides your consulting company with the cash flow it needs to meet its obligations and relieves your company from the working capital problems created by slow paying customers. The transaction works by partnering with a factoring company. The factoring company buys your invoices for an immediate payment which gives you the liquidity you need. The transaction settles once your end customer pays for the invoices in full, under usual payment schedule.

The most important requirement to qualify for factoring is to have commercial customers with good credit. This is important because the factoring company is using your customers payment ability as collateral. Aside from this, your company must also:

• Invoice for completed work
• Have invoices that are free and clear of encumbrances
• Be free of legal and tax problems

Accounts receivable factoring can be an ideal source of financing for growing consulting companies. The line is based on your invoices and it will grow dynamically with your revenues. This makes factoring an effective source of financing for growing consulting companies that are being held back by working capital problems.

The three most important tasks for a consulting company are a) finding good talent b) finding good clients and c) making payroll. In this article we’ll talk about C (“making payroll). Making sure that your employees are always paid on time is critical for a number of reasons. Perhaps, the most important one is that you want to make sure that your employees are happy since they are your most important asset.

While making payroll is usually an easy task for larger consulting companies, it can be very difficult for smaller companies. This is because most customers pay their consulting invoices in 30 to 60 days. However employees need to be paid every other week. This creates a common cash flow problem – slow income matched with recurring expenses. In an ideal world, you should be able to cover your expenses from the company cash reserve. But circumstances are usually not ideal, and more importantly, few small consulting companies have any substantial cash reserves.

One obvious alternative is to try and accelerate your cash flow by offering quick payment discounts. It’s common in the industry to offer a 2% discount on invoices that are paid in ten days or less. If this does not work, another alternative is to use business financing to cover the gap until invoices are paid.

There is one form of business financing that is well suited to address cash flow problems created by slow paying customers. It’s called factoring financing. It accelerates your payments due from customers, providing you the funds you need to cover payroll and other important expenses. It works using a financial intermediary called a factoring company, which provides funds using your invoices as collateral. The transactions close once your customers pays in full.

One advantage of invoice factoring is that it’s much easier to obtain than most business financing solutions. The most important requirement is that your customers need to have solid commercial credit. This is because their invoices are the collateral that the factoring company is basing the transaction on. Also, your invoices need to be clear of encumbrances, which means that your company can’t have legal or tax problems.

Perhaps the most important advantage of factoring is it’s growth flexibility. Factoring lines are tied to your sales and can grow easily – provided your sales are to credit worthy commercial customers.