Facing financial difficulties in business is, unfortunately, a reality for millions of entrepreneurs – especially in times of economic downturn or stagnation. Knowing how to deal with problems and seek solutions to keep operations active and finances in order, therefore, is an increasingly frequent need for administrators.
In this context, there are tools that the entrepreneur can use to help balance accounts and not contract debt. Among the most common is the anticipation of receivables. It is about this option that we will talk in today’s article.
Continue reading, understand everything about anticipating receivables and find out when it is worth requesting this resource for the benefit of your business.
What is prepayment of receivables?
The prepayment of receivables is the advance payment of commitments made over time – such as credit card sales in installments, post-dated checks from customers, purchases in the booklet and trade notes, which are transformed into immediate net funds. In this way, the entrepreneur can advance what he would receive over time and meet his financial obligations in the short term.
This anticipation process is carried out through financial institutions, securitization or factoring, which assume responsibility for the future receipt of negotiated amounts and transform these commitments into cash for the company. In this process, however, there are fees and discounts charged on the anticipated amount.
How does this anticipation work?
To understand the dynamics of prepayment of receivables, it is worth comparing it to prepayment of Income Tax (IR) or Christmas bonus, offered to individuals by financial institutions. The process is quite similar, although the prepayment of receivables is only requested by legal entities – whether they are micro-enterprises or larger companies.
The costs involved include any fees charged on the anticipated amount and interest rates – which are charged by the institutions that advance the amounts to the companies. Interest usually varies according to the time required to offset the credits to be received.
Imagine, for example, that your company performed a service in the total amount of R$ 1,000, which was paid in 2 installments on the credit card by the customer. When anticipating this receivable, you will pay interest over this period of 2 months – which will be the maximum period for the institution that will carry out the advance to receive the amount in installments. If the purchase has been paid in 6 installments, however, the incidence of interest should be higher.
Therefore, when requesting an advance on receivables, it is essential that you know the costs involved in the operation. This way you stay informed of the procedures and avoid unpleasant surprises when paying the transaction fees.
What are the advantages of anticipating receivables?
The prepayment of receivables offers companies a series of advantages. Compared to other lines of credit available in the market, prepayment of receivables is usually cheaper – since the resources being used come from the business itself.
In addition, the process of anticipating resources is usually quite fast – allowing the entrepreneur to use the money to pay off the company’s outstanding debts and avoiding debt or financial difficulties in the short term. The transaction risks can also be reduced, especially in cases where payment is guaranteed – such as purchases made in installments using a credit card.
Using the option of prepayment of receivables, therefore, allows the entrepreneur to solve an immediate difficulty involving the company’s finances and balance its cash in a short period of time and with reduced costs.
What are the disadvantages and risks of anticipating receivables?
Although this resource is very useful for companies of any level, it is important to point out that there are disadvantages and risks involved in the prepayment of receivables operation. Therefore, it is essential to analyze all scenarios – and all possibilities available – before opting for prepayment of receivables.
Among the main risks of this process is a possible breach of payment obligations by the company’s customers. In certain cases – in which payment in installments has not yet been confirmed, such as sales via booklet or post-dated checks, non-payment may negatively impact the company that requested the advance of receivables.
When this occurs, the company may need to pay outstanding amounts and even have its name included in credit protection bodies. Due to this risk, it is imperative that the entrepreneur considers the profile, history and reputation of the payer before requesting the advance of a payment receivable that may not be paid in the future.
Another risk that the company runs in this type of situation is that of paying more for the advance of receivables compared to other lines of credit – which can also have a negative impact on the business cash. In order to avoid this problem, it is fundamental that the entrepreneur knows all the rates that apply to the operation and compares them with other credit options available in the market.
When to request the advance of receivables?
Requesting the anticipation of receivables is quite common among Pak companies, especially among those that need to cover some urgent expense or need working capital. It is a tool that can – and should – be used, as long as the entrepreneur is careful and careful when using it.
It is necessary, however, to pay attention to the reasons that led the company to need the anticipation of receivables. Often, the decision is necessary thanks to problems related to lack of planning and management – which need to be corrected in any situation and at all times.
Analyze the situation of your business and check the best solution for the problems faced. With caution and planning you can make good decisions and keep your company on track for growth.