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Financial Reporting Prompts Factoring

By Kristin Gabriel

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Published: 27Mar2011
Word count: 403
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It is a good idea for a small business to get into the habit of facilitating good, accurate, and timely financial reports, so they can then analyze and assess their company's past and current performance. Financials enable tracking in real time, so if things are not going so well, it provides an opportunity for a quick fix via factoring.

In addition, financial reports help business owners with the entire process of understanding, monitoring and controlling costs. This fulfills your bank and other third party requirements, including tax preparation, and it helps set your quyarterly financial targets. This will also enable projections for next year, and lets you know as to the need to implement something such as factoring services to help pay bills if accounts receivables are runninlg slower than usual.

Financial reporting usually includes a balance sheet, a statement of cash flows, and an income statement. Plenty of computer programs include these basic monthly financial reports, with month by month budgets producing profit and loss income statemenst and balance sheet forecasts, plus cash flows, monthly bank covenant balance forecasts and also even key financial ratios. Anfd some profit/loss forecasts also include monthly earnings before interest and tax per share and after tax earnings per share and fixed asset capital plans.

Small business owners often stress because their invoices have not been paid on time. Some have 30 day invoices that are running at 60 and even 90 days out, thanks to the recession. But the one tactic mentioned above that can alleviate stress if the funds just aren't there this month to pay your bills, is factoring. Also known as accounts receivable factoring, small businesses globally are finding out that it is one of finances best kept secrets.

Here's how it works. A factoring company will usually begin the invoice factoring process with due diligence, a step that typically takes up to two business days. Once completed, you, as the client, are at liberty to offer invoices for purchase. Upon receipt of these invoices, the factoring company will check the credit of the debtor named on each of invoices and make sure that the sale represented has been completed satisfactorily. Then the debtor is advised of the purchase by the factoring company and you will receive funding. At the end of the credit period, the debtor completes the deal by paying the invoice factoring company directly.

Kristin Gabriel works with The Interface Financial Group (IFG), a company providing short-term financial resources including invoice factoring, serving clients in more than 30 industries in the United States, Canada, Australia and New Zealand. IFG operates on a local basis with expertise in accounting, finance, law, marketing and banking. www.ifgnetwork.com

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