How late payments affect companies’ working capital and why factoring is still an underutilized tool for small and medium-sized businesses were among the topics discussed by Tihomir Tihomirov, head of the Sales Department at Smart Factoring, on the “Portfolio” program on Darik Business Review.
A sale does not always mean immediately available funds
For a company, a sale does not always mean immediately available funds. There may be a period of 30, 60, or more days between issuing an invoice and receiving payment. During this time, the business continues to incur operating expenses, receive new orders, and require working capital.
It is precisely this discrepancy between the completion of a sale and the actual receipt of the funds that is one of the problems for which factoring can offer a solution.
In his appearance on “Portfolio,” Tihomir Tihomirov discussed the development of the factoring market in Bulgaria, the role of deferred payments, and the service’s potential to reach more small and medium-sized enterprises.
Sales are rising, but the money may remain tied up
As a business grows, the need for working capital may also increase. The company must finance the next shipment, pay employees and suppliers, and fulfill new orders while waiting for payments on invoices that have already been issued.
This creates a financial gap between the time the business makes the sale and the time it can use the funds.
Factoring allows this difference to be managed by providing earlier financing for accounts receivable.
Factoring and Small and Medium-Sized Businesses
According to Tihomir Tihomirov’s commentary, it is precisely among small and medium-sized enterprises that there is significant potential for the wider use of factoring, since late payments can have a more significant impact on their available working capital.
This topic is part of a broader discussion about how businesses can use their past sales as a resource for their next steps.
Read the full article
The full interview and analysis of the topic have been published in Darik Business Review.