Accounts receivable represent sales that have not yet been collected as cash and may be your company's most valuable asset. You sell your merchandise or services in exchange for a customer's promise to pay you at a certain time in the future. If your business normally extends credit to its customers, then the payment of accounts receivable is likely to be the single most important source of cash inflows.

In the worst case scenario, unpaid accounts receivable will leave your business without the necessary cash to pay its own bills. More commonly, late-paying or slow-paying customers will create cash shortages, leaving your business without the cash necessary to cover its own cash outflow obligations.

Accounts receivable also represent an investment. That is, the money tied up in accounts receivable is not available for paying bills, paying back loans, or expanding your business. The payoff from an investment in accounts receivable doesn't occur until your customers pay their bills. The idea of accounts receivable as an investment is an important concept to understand if you wish to consider the impact of accounts receivable on your cash flow.

By factoring or financing your accounts receivable, you are NOT creating any additional debt. By factoring your accounts receivable, you may not need to give up any ownership of your company to obtain working capital.

Why borrow money long term when you can factor your invoices for immediate cash? You can factor all or a portion of your accounts receivable to satisfy your cash flow needs. The decision is yours. Financing your receivables can help your company:

• Expand into new markets
• Work with larger, more demanding customers
• Receive professional assistance with the evaluation of a new customer's ability to pay
• Receive cash from your most valuable asset within 24 hours
• Simply make payroll next Friday