How PO Financing Helps Cash Flow
Posted on: 21 September 2022
Purchase order (PO) financing is a common practice among businesses, but do you know what it is? If not, you might want to learn about it if your business invoices its customers. When you invoice customers, they have time to pay their bills. It might be 30 days or longer, and you must wait that amount of time to receive the money for the goods you sold. Your customers might love this, and you might see an increase in sales. However, you might also experience a cash flow problem. If you can relate, you might want to learn about PO financing.
What is PO financing?
PO financing is a relatively simple concept that requires two parties. First, it requires a company that buys invoices. This company is the PO financing business. Secondly, it requires a business that wants to sell their invoices. The business with invoices sells them to the PO financing company, and the PO financing company gives the business cash. The PO financing company does not pay 100% upfront for these invoices. Instead, they offer a lower percentage.
What are some reasons businesses use it?
Businesses use PO financing for cash flow issues. For example, suppose you have customers with invoices totaling $50,000. This means that your customers owe you $50,000, but they might not have to pay these for another 30 or 60 days. If you need some cash to pay your bills, you might not want to wait for 30 days or more to collect the money owed to you. So, you can turn to PO financing. When doing this, you sell these invoices and receive cash right now. This cash alleviates your cash flow problems.
What else should you know?
You can set this up to automatically sell your invoices to a PO company if you wish. On the other hand, you can use PO financing services only when you need them. You can compare the way PO financing companies operate before choosing one, including comparing the fees they charge. Using PO financing is one of the best ways to alleviate cash flow problems without taking a loan from a bank to increase your cash flow.
How to find a PO financing company
You can search for companies that offer PO financing. Then, you can compare their offers and choose the best one. If your company has cash flow problems from invoicing, this could be the solution you need for your business.
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