One of the most valuable aspects of the Odoo open-source platform is the Odoo Apps Store, which currently offers more than 50,000 apps that can enhance your business in many ways.
And one of the newest apps can help you turn your invoices into cash in a single day instead of the typical 30, 60 or 90+ days. The app uses a little-known form of alternative financing called invoice factoring to help small and mid-sized businesses (SMBs) improve cash flow and financial stability.
Cash is a company's lifeblood, and accelerating cash flow is critical to its health and survival. A recent intelligence report from PYMNTS revealed that 60% of SMBs consider cash flow management to be their biggest challenge, and slow payment is a major cause. The average collection period is around 50 days, and one in five corporates only pays their suppliers after 90 days. This can make it difficult to find the liquid capital you need to scale up and fund business growth.
What is invoice factoring?
A surprisingly small percentage of businesses use factoring as part of their financial management processes. According to Fed Small Business, only 3% of SMBs seek out factoring, compared to 89% that apply for loans or lines of credit. Yet factoring is a lower-cost option than most alternative financing, including merchant cash advances and online loans.
When you factor an invoice, the factoring company sends you those funds on the same day. Then they are reimbursed 30, 60, or 90+ days later when the customer pays the invoice. This process lets you accelerate cash flow and free up working capital sooner. And unlike loans and lines of credit, factoring is a debt-free form of financing, since you are receiving funds you have already earned.
Why should you factor your invoices?
All types of B2B (business-to-business) companies, from startups to global enterprises, can factor their invoices. The top advantages of factoring are:
- Immediate access to working capital.
- It's one of the most affordable sources of alternative financing.
- It does not negatively impact a business’s credit score.
- Businesses with low credit scores or startups with no credit history can still qualify.
If you have been turned down for bank loans or lines of credit, have maxed out your available low-interest credit, or don't want to take on any additional debt, factoring can help you access the working capital you need to pay for operations or grow your business.
How to factor your invoices on Odoo
The new app from AR Funding gives you convenient access to factoring right on the Odoo platform. The integration is brought to you by AR Funding, a U.S. company with nearly 30 years of experience in accounts receivable funding and invoice factoring.
Here's how it works. Once you download the app, you'll see a "Factor invoice" button activated the next time you open an invoice on the platform. Simply click the button to get immediate cash for that invoice. If you want to factor multiple invoices at once, you can do so from the invoice aging screen. Whether you select one invoice or many, you'll receive the cash the same day, minus a small processing fee. The AR Funding team takes care of everything, including the collections and credit management processes.
As an Odoo business consultant, I'm excited to have yet another valuable on-platform resource for my clients. This underused financing source has the potential to help you solve one of the biggest pain points you face and gives you one more option in your financing toolkit.