As business and employment models have evolved in recent years, independent consultants and consulting companies have become increasingly common players across all industries. Consultants can specialize and excel in one area of expertise and work with a variety of companies. Consultants can also fill in, long-term or temporarily on a regular basis, with a company to save the client money for benefits and other payroll variables.
Consulting companies rely on regular revenue, but sometimes must wait 30, 60, or even 90 days for payment. Even if a consultant has a strong pipeline of projects, it can be difficult to keep up with fixed expenses during that interval unless the company has a deep reserve of working capital. To bridge that gap between sending out invoices and receiving payment, a growing number of consulting businesses are turning to factoring to solve their cash flow challenges.
Factoring gets consulting businesses paid quickly for the work they have completed so they don’t need to take out bank loans or incur debt to meet payroll and other obligations while waiting to be paid. As bank loans become harder to obtain, more consulting firms are turning to factoring in part because factoring companies will evaluate their applications based on their clients’ creditworthiness, not their own assets or credit history. Factoring is a proven way to help consultants with today’s expenses and tomorrow’s growth.
Factoring Tips for Consultants
The consulting industry will continue to be big business, but consulting firms must work smart. To help you stay profitable during projects, work with a factoring company that employs professionals who know your industry.