Tag Archives: factoring

Small Business and the IRS

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The Wall Street Journal recently reported the following, “The Internal Revenue Service, moving aggressively to collect more taxes from small businesses, is telling companies being audited to turn over exact copies of the electronic records kept in their business-software programs, according to a letter from an agency official to the American Institute of CPAs.”

It is always important to keep good financial records in order to understand how your business is doing but it looks like it may become much more important if the IRS is requesting files from automated accounting software. Banks, factoring companies and now the IRS will want to see financial statements. Well kept accounts make it easier to provide the requested information. IFG’s invoice factoring service will always require financial statements as a part of the initial requests for information as will other financial institutions.

Maintaining good financial records is important and can save you considerable time when applying for money or working with the IRS.

Jan J. Cunningham

The Interface Financial Group

US Small Business and the Economy

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A recent quote in a Stansberry publication stated, “We own a small [business]… 15 employees. We cannot raise prices because of market pricing competition. Our cost of goods have gone up… rent etc. we are being squeezed on profits which have been [negative] for 2 years. Small business which is the largest employer in the country is having a difficult time adjusting.”

This is not unfamiliar, many companies are facing the same issues and continue to work hard to overcome the problems. The economy as it relates to small business continues to be a mixed bag.  The April Discover Small Business Watch states that, “April results show a surge in the number of small business owners who say economic conditions for their own businesses are getting better: 30 percent of them say the climate will improve in the next six months, compared to only 20 percent in March. Of the remaining respondents; 48 percent say the climate is getting worse, but that number is down from 53 percent in March.”

There may be some downward revisions in the next survey as several economic indicators are showing a possible slow down in economic growth which could have a big impact on small businesses. Those businesses that are growing can benefit from invoice factoring to assist with cash flow. Funds can be obtained in 24 or 48 hours when required and there are no contracts, it is a “use it and you need it” service.

Jan J. Cunningham

The Interface Financial Group

Diving Deeper

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An important part of Due Diligence is the Site Visit, site visits must be taken seriously when performing Due Diligence for invoice factoring transactions. The site visit is an opportunity to ask questions  that may not have been covered in the original telephone inquiry or application for invoice factoring and to look at the operation and determine if it is being effectively managed. It is also an opportunity to dig deeper for information and to evaluate the character of the individual(s). Any “red flags” identified in initial discovery or during the site visit, need to be considered and questions asked in order to eliminate the flag.

The site visit is an important aspect of Due Diligence. It must be taken seriously and performed well. This is an opportunity to discover what may not be identified during other aspects of Due Diligence. When funding a client on a repeat basis a periodic follow-up visit to the company is recommended.

 

Customer refuses to sign Notification…Now what?

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You finally sign on with a factoring company, you are almost ready to get funded. Usually, the last step in the process is for your customers to sign a Notification of Sale (also known as a NOS), which then allows you to factor the invoices for that customer. The catch – sometimes customers refuse to accept or acknowledge the notification of sale. This can be a problem because factoring companies will not fund your invoices until your client signs/acknowledges the Notification of Sale. Stated simply:  your company’s cash flow could be affected if an important customer refuses to acknowledge the NOS.

There are some approaches that can help minimize the chance of this problem occurring. The best way is to be straight forward about the value factoring brings to your customer. Basically, why should your customer sign the NOS? What is in it for them? Why would they care if you get factoring? The only answer that I have been able to come up with is that by having an invoice factoring line, you will be able to offer them flexible payment terms. You also won’t (or shouldn’t) be calling them asking for quick payments. So, you are offering them financing in the form for flexible payment terms in exchange for their cooperation with your factoring company.

It’s good to remember that customers love to get net 30 to net 60 payment terms. It’s free financing and it allows them to better manage their own cash flow, usually at your expense. So in my view, the argument that factoring allows you to offer them good payment terms is a solid one.

No approach is guaranteed to work – but showing a customer how something benefits them (rather than how it benefits you) is a good place to start.

Sabeen Ahmed

The Interface Financial Group

 

Clear Cut Financial Statements Required

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Most in the industry know that factoring companies tend to have more business during downturns. And now that the economy is in a credit crunch, small business owners are flocking to invoice factoring companies. But for some reason, a number of these new prospects are missing the boat and not getting their financing.

Why? A number of them are neglecting to present their applications with care. And many are just turning in awful financial statements. And by awful, I mean: Items are mislabeled, Amounts are incorrect, Items don’t make sense, Listing personal expenses as business expenses and the list goes on.

To be frank, it’s no wonder they got turned away by a bank and could not qualify for a business loan. But unless they are a bit more careful, invoice factoring will not be an option either.

So, if you are looking for business financing, invest a little money and have a professional (e.g. CPA) prepare your financial statements.

Sabeen Ahmed

The Interface Financial Group

 

Construction on the Rise?

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“Permit issuance for construction of new homes and apartments rose 16.7 percent in December to a rate of 635,000 units, the strongest pace since March of 2010. Building permits, which can be an indicator of future building activity, rose 16.7 percent in December on gains in both the single- and multifamily sectors. Permits rose by substantial margins in three out of four regions in December, with gains of 80.6 percent, 3.3 percent, and 43.9 percent recorded in the Northeast, Midwest and West, respectively. The South was the only region to post a decline in building permits, of 7.6 percent” as reported by the National Association of Home Builders.

“The latest government report indicates that builders are preparing for an anticipated improvement in buyer demand in the spring buying season by pulling more permits in hopes of soon replenishing the very tight inventory of new homes for sale,” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “That said, it remains to be seen if the availability of financing for new construction and existing viable projects will improve in order to make building feasible and facilitate a housing and economic recovery.”

This is encouraging news for the construction industry. New permits will provide for more jobs as construction begins. As growth slowly returns, construction sub-trades will need capital to cover expenses. Banks are not going to be willing to rush back into construction lending but sub contractors can obtain funding through an invoice factoring facility, providing needed capital to pay employees, other sub contractors and suppliers.

Jan J. Cunningham

The Interface Financial Group

Small Business and the Economy

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The U.S. economy looks to be in better shape, but a full recovery will only be achieved once small firms begin to prosper, Federal Reserve Chairman Ben Bernanke said Thursday. Mr. Bernanke said the economy should expand at a healthy pace of between 3% and 4% this year, but that still won’t be enough to cut a high unemployment rate. ”We do want businesses that are viable and have good business plans and lots of experience backing them up to get loans,” Mr. Bernanke told a small-business forum.

The Fed is pushing banks to lend again but the lending will only be going to established companies with strong business plans. Where does that leave the rest? The new businesses that have started, those that were damaged over the past three years or companies that may have had credit problems as a result of the economic downturn? The banks are not open for these companies but there are alternative funding sources available. Small business can use their assets (accounts receivable) to needed capital. Invoice factoring allows a business to sell select invoices and receive the cash needed to grow and expand as the economy again begins to grow.

Jan J. Cunningham

The Interface Financial Group

 

Small Business Blog Posts

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Over the past two years, we have published a number of blog posts. These posts were about small business, the economy, small business surveys, due diligence, risk management and many other topics. As the new year begins, we thought it would be of value to review past blog posts and republish some that bear repeating updating information where appropriate.

Some will be a look back, others will contain information that is relevant every day to small businesses. We hope you enjoy the information and will find it informative and useful to your business.

For more information on invoice factoring (click) or visit our website at IFGNetwork.com.

Jan J. Cunningham

The Interface Financial Group

A Happy New Year for Small Business Owners

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When the clock strikes twelve on December 31st, people all over the world cheer and wish each other a very Happy New Year. For some, this event is no more than a change of a calendar. For others, the New Year symbolizes the beginning of a better tomorrow. For small business owners, it represents a new dawn where small business will begin to see recovery, growth and a return to prosperity after four difficult years.

It may take time and there will be bumps in the road but the path is trending upwards. This is a time for small businesses to take a favorable view of events and conditions and to expect a favorable outcome, with an eye to caution. There will be new tools available to help in the new year.

We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called “Opportunity” and its first chapter is New Year’s Day. Edith Lovejoy Pierce

Jan J. Cunningham

The Interface Financial Group


 

Holiday Gifts for Small Businesses

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It is the holiday season and everyone, young and old,  has their wish list prepared. What are small businesses wishing for this year? It is a simple list, one that will help these businesses survive into the future.

  • Consumers spending money but not wasting it.
  • Large corporations spending to help boost the economy.
  • Less government regulation and interference.
  • Certainty in the marketplace and government.

For the first time in three years, it appears that there is improvement in each of these areas but there is a long way to go before small businesses will begin to build inventory, hire employees and thrive again. There are initial signs of growth and 2011 may be the first real year of recovery. As businesses begin to grow again, funding sources will be necessary to help fund the growth. Invoice factoring can provide the needed cash and working capital as small businesses begin to find their footing.

Jan J. Cunningham

The Interface Financial Group