Using Invoice Lending Improves Research and Development
Posted on June 24, 2014 in Factoring
If you run a business that assembles or manufactures products, then you know the importance of research and development. When it comes time to put together the company budget, the R&D department is usually a large portion of the company spending. If you want to stay ahead of the competition and remain an industry leader, then you need to invest heavily in research and development.
Research experts and successful product engineers get paid a great deal of money for what they do. These are the professionals who spend years in school and even longer in the corporate world developing the skills that are going to create the next great innovations that will make some company successful and famous. This race for top talent is what inspires so many companies to put a huge amount of money into funding their R&D efforts.
But the costs of research and development do not stop at the talent needed to develop the latest innovations. The equipment and materials needed to bring the ideas to life is also extremely expensive. It all works out well when the research and development efforts create a successful prototype that can be sold for a profit. But for every successful product that makes it to market, there are dozens that were funded and did not make the cut. This ongoing need for supplies, talent and equipment for research and development to create unsuccessful versions of a product is what increases corporate costs.
No company wants to spend more than it can afford on research and development, but the importance of corporate innovation requires every company to open up their budgets and sometimes spend money they do not have. In some cases, the money is not there because of slow cash flow. The customers who do not pay their invoices on time are causing your company to get bank loans and other forms of financing just to keep research and development alive. As you can see, borrowing to fund research and development is a downward spiral that can eventually bankrupt a company.
The solution to this financial problem is to find an alternative to borrowing extra money to fund research and development. Your company does not want to pull back on R&D activities, but it also does not want to go broke because it cannot keep up with the financial needs of the research group. The frustrating part of it is that the money would be there if your customers would just pay their invoices on time. You would not need to borrow funds if your customers would do their part and pay their financial obligations.
Instead of borrowing more money from a bank, or risk damaging your relationship with your customers by utilizing aggressive collections tactics, you should look into using invoice lending to fun your research and development group. An invoice lending organization will help you to improve your cash flow by utilizing the outstanding invoices you already have to get you the cash you need to pay salaries, materials costs and equipment costs for research and development.
An invoice lending organization can give you the money for your invoices on or before the invoice due dates. You get the full amount of your invoices on time, minus your lending costs, and you also eliminate the collections process as the lender will be the one collecting the money from your clients. The process will be seamless to your clients because the lender will be collecting as though it was part of your organization. You get to retain your relationships with your clients because your collections will be taken care of by a professional organization that understands how to take care of clients without damaging the relationship.
Invoice lending also allows you to make unique deals with clients to get the money you need for research and development. For example, let's say you have a client who wants to place a large order with your company, but the customer wants 90 day terms. After a thorough credit check, you and your invoice lender determine that the company is creditworthy. But you also know that you cannot afford to finance a large invoice for 90 days.
The invoice lender would give you a large portion of the invoice immediately, and then pay you the remaining portion, minus fess, when the invoice comes due in 90 days. You get the money you need when you need it, and you do not have to worry about collections. You can improve your cash flow and get your research and development team the talent and resources it needs to develop the innovations that will make your company an industry leader.