Invoice Factoring for Freelancers
The Freelance Economy
Working for yourself can be extremely satisfying. You make your own hours, set your own prices and deal with clients in whatever manner you choose. Freelancing allows you to do what you love without the B.S. associated with a traditional workplace or employer.
Roughly 55 million Americans are currently part of this ‘freelance economy’. Some of the more common freelance positions today are in writing, web design, software development and graphic design. Others include accounting and finance, customer service and administrative.
The independent streak exhibited by Millennials is likely to further this movement. By 2020, freelancers could amount to 40% of the total American workforce according to an Intuit study.1 They are also very important to the overall economy- contributing an estimated $1 trillion to the U.S. economy in 2016.2
But this freedom comes at a price-slow payment. When it comes to prioritizing accounts payable, freelancers are often treated lowest on the totem pole. Make no mistake, this is a strategic decision by many larger businesses because increasing their cash conversion cycle improves their cash flow and profit margin. For the freelancer often is forced to wait 30, 60 or even 90 days for payment for services already performed!
Invoice Factoring for Freelancers Pays the Bills!
Many freelancers depend on prompt payment to pay their own bills. Unlocking the cash tied up in receivables can also allow you to take on another project.
If you are experiencing cash flow problems, consider invoice factoring. Selling off your outstanding invoices to a third party factoring company provides expedited payment. Once approved, the funding is typically completed same day (done via wire transfer). A traditional small business line of credit which can take weeks or even months to complete, whereas applications from factoring companies generally takes just a few days.
Some freelancers hesitate to start factoring invoices because of the costs involved. The reality is, many invoice factoring companies, especially the more automated names like Fundbox, have straight forward, fixed rates. Often these factoring fees are between 1%-3%.
If cost concerns remain, consider raising the prices you charge for services for slower paying customers. This way, the factoring fees are essentially paid for by the customer.
Put the Freedom Back in Freelancing
Another benefit of invoice factoring is the enhanced credit services received. The credit and collections teams at many factors are often superior to yours. This might allow you to choose faster-paying clients in the future. Many freelancers get work from friends or relative’s companies so there is often little thought to their ability to pay invoices in the prescribed terms. After all, it is assumed that they will pay on time, right (we all know what happens when we ‘assume’)?
Of course, there are times in any freelancer’s career where we take whatever work we can get. But when things are going well, it is good practice to shore up that customer base. Having to take the time out of a workday to reinvoice a client or make that awkward phone call is a waste of time and resources.
Invoice financing allows you to focus on running your business while someone else handles the collection duties. Request a free quote on invoice factoring today.