FACTORING COMPANIES

First we will take a look at selling your accounts receivables to factoring companies or what is called accounts receivable factoring or accounts receivable funding or accounts receivables financing. There are many companies that offer this service as there sole business practice and some that has it as a side service like a bank for example. Usually there is a minimum to work with the latter, some where around $5 million in annual sales revenue. The first thing you should know is that you will be selling your accounts at a discounts of the face value. The discounts is dependent on your customers credit and the age of the invoice; the average is around 5%. The older the account the less you will be able to get for it, companies usually do not buy receivables that are more than 90 day old as it is likely a noncollectable account. The second thing is should you opt for non recourse factoring or recourse factoring.

When dealing with a factoring company you can expect to pay a fee for their services. Most companies charge anywhere from %2 to %6 of the total invoice or invoices. Some companies will collect payment directly from your customers and send you what’s left after taking there fees. This can be a good thing for you; it frees you of trying to collect from that customer. There will also be other fees outlined in your agreement so, be sure to read it carefully or have your attorney look at if for you. After you have agreed to the terms you will receive the money within a few days depending on the company.

TRADING ACCOUNTS RECEIVABLES YOURSELF.

Unlike selling your receivables to a company, you auction them in a marketplace similar to Ebay to investors. A receivables marketplace gives you more control than a factoring company. You will still have to sell your accounts at a discount, but you will have more say in how much of a cut you are willing to take.

You will not be selling accounts to individuals, but to commercial entities that has passed the membership process of the marketplace. This process includes a background check, legal paperwork and a minimum in investing capital. This is a secure alternative when looking for receivables financing ( receivables funding ). There are fee to use the marketplace which includes registration, posting, closing transaction and administrative fee.

Both are great avenues to getting to cash flow you need for your business when you need it. Do your research before deciding which way you will go. Be sure this is the last option for your business because you will be taking a lost for the benefit of immediate cash.

What are sub-saving accounts?

These are accounts within your bank account.  If your bank has the feature to have multiple saving account, you can open saving accounts online to save for whatever you want.  Let say you want to buy a new car in two years, you can open an account and call it “New car fund” and have a percentage of your savings automatically sent to that account every month.  This will help you from spending your new car money and give you a little back up if your old car need fixing.

Sub-saving can be use to save for anything and is a great way to help you get in the habit of planning ahead.  This can also help you complete your goals on time, you eliminate one of the main two reasons our goals get side tracked… lack of funds.

There are a couple things to watch out for when setting up these sub-accounts.  I have found it is best to have money routed from you main saving account. Having it taken from your checking account can lead to the risk of being overdrawn.  If you need to, you can increase the amount being sent to your main saving account to accommodate and since more money is being taken out of your accounts be sure to keep a close eye on your checking at first.  Be careful if your bank has fees related to their saving accounts,  some banks still offer free checking and saving accounts.  If you have no idea how to setup these accounts, go talk to you account manager at your branch or call your bank.  You account manager is there to help and most people never utilize there service.  A good account manager should have the answer to all your questions and be able to help you with all your banking needs.

Having these sub-accounts will help reduce over spending and is simply just another great way to help you manage your money.

Investing is a scary subject for many, especially young adults. As young adults, we want to enjoy life and saving and investing is usually the last thing on our minds. Ironically, it is the time we should be investing heavily and planning for retirement. A little thing called compound interest can turn $50,000 into over $1.5 million in 30 years time. This is the biggest advantage young adults have when it comes to finances.

Almost any form of long term investments is good for young adults and the amount they have to invest is small compare to older folks. A 25 year old can more than triple their initial investment in 30 years, without adding another dime to it. Imagine if are 25 years old and you invested $20,000 into an account bearing 4 percent interest monthly. In 30 years time you would have somewhere around $65,000 in your account and you don’t have to invest another dollar. Now imagine if you invested another $50 monthly for the next 30 years, that would be somewhere around $100K. Over the 30 years time, you would have only added $18,000 for a total of $38,000 invested and a profit of $62,000.

The reason more young adults fail to take advantage of this powerful technique, is simple lack of knowledge. They do not know it exist and how powerful it is. We usually learn this later in life and try to play catch-up, but time is something we can never get back. I have said before that personal finance should be a mandatory part of every high school, but it is not. It is left up to parents to teach their children about saving and investing, but most parents know just as much as their child. It is an easy subject to grasp and with extensive resources to help you learn and it is available to all young and old.