10 Inventory Management KPIs Your Business Should Be Tracking

Posted on by Amanda Levine

Inventory is at the core of success for every product-based business. It’s what generates revenue, but it’s also what ties up most free cash. For product-based businesses to operate efficiently and maximize potential, they must have accurate inventory management systems and track KPI’s. Determining what this exactly means for your company can be challenging, but with a little bit of research and education we’re confident that you can make significant improvements.

What are KPIs in business inventory management?

KPI stands for “key performance indicator” and is exactly what it sounds like – a metric or data point that is a key indicator of your company’s performance and success.

If you operate a product-based business, most of your KPIs are going to be related to inventory management and maintaining products in stock. By measuring key aspects of your company’s inventory in real-time, you can make informed business decisions that will increase profitability and improve your bottom line.

How is inventory management measured?

There are many different KPIs that can be used to measure the success or failure of your current inventory management systems. Companies often use specialized software or companies who provide analytics services to help them keep an eye on this key business data.

The benefits of measuring your inventory management performance includes the ability to see how efficiently your company is moving products off the shelves and how your actual product sales compare to sales forecasts. Utilizing this data helps your company anticipate future business needs and pivot when needed, which translates to increased revenue and profitability.

We’ll cover the most common and most helpful inventory management KPIs in more detail in the next section.

Top inventory management KPIs your business should be tracking

Proper analytics is key to your future business success, especially when it comes to inventory management. Knowing and understanding your company’s relevant data and trends will help your business increase profitability, reduce expenses, manage cash flow, evaluate the need for financing, avoid understocking or overstocking, and account for seasonality.

Here are the top KPIs your retail or product-based business should be tracking:

  • Product Sales: You may also see this KPI called “sales revenue.” It’s the revenue gained from customer purchases minus any returns, discounts, and other losses. This metric is typically tracked on a monthly, quarterly, or yearly basis. To calculate product sales use the following formula: Gross sales revenue – sales returns – discounts.
  • Cost Per Unit : This KPI measures how much it costs your company to produce or buy a single unit of a particular product. It’s important in calculating your profit margins and financial projections, placing orders, and knowing which products are the most cost-effective. To calculate cost per unit, use this formula: (fixed costs + variable costs) / # of units.
  • Rate of Return: Rate of return (ROR), commonly known as return on investment (ROI) is calculated as a percentage and is used to show the profit or return made on the initial investment, usually expressed annually. This number is a key indicator of the strength of your business along with its potential for future growth. To calculate ROR, use this formula: [(final value – initial value) / initial value] x 100.
  • Inventory Turnover Rate : Also known as the inventory turnover ratio, this KPI measures the number of times your business sells and replaces its product inventory in one year. This number indicates how fast your inventory is moving off the shelves, which helps you identify areas of overstock and measure the efficiency of your product sales. It also lets you know the current performance of your inventory management and marketing strategies. High turnover, while generally a good thing, can also be a red flag to areas of insufficient stock. On the other hand, low turnover can suggest issues with overstocking or simply be a result of sluggish product sales. The 2 most common ways to calculate turnover include: Cost of Goods Sold / Average Inventory OR Sales / Inventory.
  • Days Sales of Inventory: This key metric helps calculate the amount of time it takes a company to turn its inventory into sales. DSI is typically expressed as an average number of days and uses the following formula: (Average Inventory / Cost of Goods Sold) X 365.
  • Stock to Sales Ratio: Stock to sales is a ratio that measures the amount of inventory in storage vs the number of sales. This key metric is used in making inventory stocking decisions. Stock to sales ratio = $ inventory value / $ sales value.
  • Stockouts: Usually expressed as a percentage, this number helps measure how many items are “out of stock” at the time of order. This KPI is an indicator of your ability to meet customer demand. Having too many stockouts results in a decrease in customer satisfaction as well as the potential loss of future business. Stock outs can be caused by seasonal increases in product demand, poor inventory management, production delays, or supply chain issues. There are a few different ways to measure stockouts including: Volume of unmet product orders as a percentage of total sales volumes, volume of unmet product orders as a percentage of total purchase orders, or number of products on stockout as a percentage of total product lines.
  • Backorder Rate: Backorders not only cost your company time (and possibly money), but they also can hurt your reputation. When customers regularly find that your most popular items are out of stock, they begin to lose faith in your business. Backorder rate is the measurement of how many orders a company is failing to fulfill at the time of order. A low backorder rate indicates a well-managed inventory system, while a high backorder rate identifies a need for better forecasting to keep items in stock.  To calculate your backorder rate, use the following formula: (# delayed orders due to backorders / total # orders placed) x 100.
  • Inventory Shrinkage: The inventory shrinkage rate helps companies determine the rate at which the value of their inventory has been reduced due to loss, theft, or errors in reporting. To calculate this important KPI, simply subtract the actual current value of your inventory from the expected value of your inventory, and then divide this number by the expected value. This KPI can be most accurately measured immediately following a physical inventory count (otherwise known as an audit). You will want to keep an eye on your shrinkage rate over time and use it to help identify and correct any pain points such as inaccurate record keeping, frequently damaged goods, or employee theft.
  • Lead Time: Lead time is the amount of time it takes for a customer to receive their order after purchasing it. Lengthy lead times can be an indicator of issues with your supply chain or order fulfillment process, while short lead times are an indicator of healthy business operations. To calculate lead time, simply add your order processing time + production lead time + delivery lead time. The faster your lead time is, the higher your customer satisfaction will be (think Amazon Prime).

How Kickfurther can help

Once you know and understand key inventory management metrics, your business can take advantage of funding opportunities. Keep in mind that funding can be costly so make sure you’ve accounted for additional costs. Traditional financing or funding methods are often the most expensive and hard to qualify for, thus forcing business owners to flee for alternative methods. Here’s where Kickfurther comes in to help. Kickfurther is the world’s first online inventory financing platform that enables companies to access funds they were unable to acquire through traditional sources. Compared to other funding sources, Kickurther is up to 30% cheaper. 

So, how does it work?

Kickfurther has companies start by creating a profile. Next, we connect brands to a community of eager buyers who help fund the inventory on consignment and give brands the flexibility to pay that back as they receive cash from their sales. Flexible repayment schedules alleviate cash flow challenges that are often made worse by traditional lenders. Small businesses can take advantage of flexible repayment schedules by allowing the brand to scale quickly without impeding your ability to maintain inventory. To qualify for funding through Kickfurther, brands must sell physical products or non-perishable consumables. In addition, brands must have revenue between $150k to $15mm over the last 12 months. Our average funding amount is $78,000, but businesses can fund up to $1MM to manufacture new inventory or get reimbursed for current stock.

Closing thoughts

Whether you handle the collection of your key inventory management data points in-house or you outsource these calculations to a third-party company or software, knowing and tracking the top KPIs for inventory management are critical to future business success. With confidence in how much inventory you need to achieve sales goals, you can earn the confidence of backers to secure funding. Funding for inventory can resolve cash flow challenges that inventory may cause. 

Interested in getting funded on Kickfurther? Create a free business account today to get started!

10 effective ways to avoid the most common inventory mistakes

Posted on by Amanda Levine

Inventory mistakes are costly – there’s no denying that. While mistakes can lead to our success, they can also lead to failure. As humans, we are bound to mistakes from time to time, but we should do everything we can to avoid them. In business, this often means educating yourself. 

Top inventory mistakes and how to avoid them

Many product-based companies make the same common mistakes when they are first starting out.

Small business owners have many things to keep in mind when setting up a retail store or eCommerce website, and it can be easy to drop the ball in a critical area.

Luckily, you can learn from the issues other companies have experienced and take steps to avoid these common inventory management pitfalls. The first step toward avoiding mistakes is being aware of them. Here are some of the top inventory mistakes.

  • Manually managing your inventory: With so much technology out there to help, companies who are still attempting to manage their inventory the old fashioned way are missing out. Software can help with everything from inventory visibility to product demand forecasting, eliminating costly inventory management issues like overstocking and understocking. This becomes even more important if you are remotely managing several warehouse or product fulfillment locations.
  • Lacking control of products in your catalog: When you manage your inventory across different facilities it can be difficult to maintain control and visibility of your products. Your company should have a document, tool, or other resource that tracks and manages all of your product catalog information from taxonomy to profit margins. Maintaining the right information allows all of your business decisions to be data-driven.
  • Focusing strictly on price: There are so many other aspects of inventory management and order fulfillment that make a huge difference in your business success. Be sure to consider customer service, efficiency, product shipping times, analytics, automation, and other value-added services offered by your logistics or order fulfillment company. Keep these factors in mind when choosing suppliers for your products as well. When faced with a difficult choice, always go with the company that can provide better customer satisfaction and value overall.
  • Too many storage facilities: Having to maintain multiple storage facilities and fulfillment warehouses can really put a strain on your business. Although hiring third-party companies can be a huge advantage for many small retailers who aren’t quite ready to manage their own inventory, it is important to keep an eye on the efficiency of the inventory management systems and companies you have selected. Having more locations doesn’t always result in better service. Be sure to select a company who offers inventory visibility and runs a tight ship when it comes to product lead times, quality control, shipments and returns, and customer service.
  • Neglecting to forecast: It’s critical to forecast your future sales and inventory needs in order to purchase the right amount of stock. Overstocking and understocking are common pitfalls of almost any retail business, especially one that is just starting out. Having a better idea of which products are your top sellers, how often you need to order inventory, and how much product to order will save you many headaches down the road. This includes understanding your target audience and the products they buy. Many companies fail to identify their target customer and therefore miss opportunities to meet consumer demand. Understanding your customer base also allows you to tailor your marketing and advertising dollars where your efforts will be most effective.
  • Not being ready for seasonal demand: Another important part of product forecasting is accounting for fluctuations in seasonal demand. In addition to the predictable increase in demand around the holidays, your business may experience other seasonal peaks and valleys unique to your industry. For example, a clothing business should be prepared for a drop in the demand for sweaters as the weather warms up, and account for an increase in the demand for swimsuits instead. Anticipating these changes allows you to order the proper amount of inventory and avoid overstocking or understocking.
  • Failure to prioritize: Many companies fail to account for differences in product demand when placing their inventory orders. Instead, you should strive to use the ABC model. The ABC analysis system classifies and prioritizes your inventory into 3 distinct product categories: (A) high-value products with low sales volume, (B) moderate-value products with moderate sales volume, and (C) low-value products with a high sales volume. This system will not only boost efficiency but should also save you money and improve your cash flow. ABC analysis will help you understand which products need to be ordered the most often, and which big-ticket items you should avoid overstocking.
  • No automation: A lack of automation can cost your business both time and money. On the other hand, automated inventory management systems can provide real-time access to updated product information including current stock levels. Having accurate data helps you identify trends, spot problems, and keep customers happy. Your automation software should allow multiple employees in different locations to access information at the same time and keep an eye on all current orders and shipments.
  • Lack of knowledge: Whether you are managing all of your inventory and shipments in-house or using a third-party logistics company, it is critical that all employees working on the inventory management process are skilled and properly trained. Industry knowledge is especially important when operating a products-based business, and you should take steps to ensure that everyone in your company stays up to date with current market conditions and trends.
  • Not enough funds: In order to stay profitable and maintain a trustworthy reputation, your business must keep enough stock of all items for sale to avoid understocking and backorders. No company wants to have to turn orders away or be constantly struggling to keep up with backorders and apologizing for lengthy lead times. However, a lack of cash flow can hinder many good companies from being as profitable as they could be. The good news is that obtaining specialized financing such as inventory financing can help.

How Kickfurther can help

Implementing inventory systems to improve efficiency can be costly. As can just operating a business in general. If your cash is tied up in inventory you may be strapped for resources which can lead to mistakes. If funding can help you improve efficiency, avoid mistakes, and generate higher profits, it’s definitely worth the effort and cost.

Kickfurther is the world’s first online inventory financing platform that enables companies to access funds they were unable to acquire through traditional sources. In addition, Kickfurther is up to 30% cheaper compared to industry options. 

So, how does it work?

Kickfurther has companies start by creating a profile. Next, we connect brands to a community of eager buyers who help fund the inventory on consignment and give brands the flexibility to pay that back as they receive cash from their sales. Flexible repayment schedules alleviate cash flow challenges that are often made worse by traditional lenders. Small businesses can take advantage of flexible repayment schedules by allowing the brand to scale quickly without impeding your ability to maintain inventory. To qualify for funding through Kickfurther, brands must sell physical products or non-perishable consumables. In addition, brands must have revenue between $400k to $15mm over the last 12 months. Our average funding amount is $78,000, but businesses can fund up to $1MM to manufacture new inventory or get reimbursed for current stock.

Closing thoughts

Whether you manage your inventory yourself or utilize a third-party company to handle all of your logistics and order fulfillment, understanding your data and using it to make informed business decisions is the key to your future success. Utilizing consumer analytics and top inventory management KPIs, will allow your company to avoid common inventory mistakes, eliminate costly issues such as overstocking and understocking, forecast future demand, account for seasonality, maintain accurate inventory levels, and achieve maximum profitability.

The use of inventory funding like Kickfurther in combination with accurate data and reliable inventory management systems can help your business maximize growth potential.

Interested in getting funded on Kickfurther? Create a free business account today to get started!

What Is Inventory Funding and How Can It Benefit My Growth?

Posted on by Amanda Levine

Growing your business takes careful planning. If you’re like many small and medium-sized businesses, allocating financial resources to cover set expenses, investments and finance growth strategies is where creativity and resourcefulness are needed. 

It’s likely you have a list of growth initiatives that you believe will carry you to the next level. Finding the right funding partner allows you to stay flexible as you reinvest into your company to meet other growth opportunities. 

Identifying the right resources to fuel your expansion can ensure you get and stay on a growth trajectory. But how do you do this? Business veterans will tell you that hastily selecting partners can set a business back, while avoiding the decision can cause you to miss out on key opportunities for long-term growth. The key to success is to take steps early to put resources in place to support opportunities when they occur.

What is inventory funding? 

Inventory financing is a form of short-term loan, line of credit or funding that gives you the cash to pay your suppliers to produce inventory and then uses the inventory as collateral against funding. Lenders in this space include traditional banks, specialist inventory financing companies or online lenders.

It leverages the resources of a financing partner to pay for inventory production, which is one of the largest expenses many brands report. Funding can be customized to address your business’s exact manufacturing, shipping, and sales timelines so that you don’t make a payment on goods until the inventory sells. This works well with natural cashflow cycles. 

The products produced typically act as the collateral for the financing, meaning that if the business reports an inability to repay the funding, the inventory can be sold to cover the debt. 

Inventory financing is especially valuable to any business experiencing a significant delay between paying for inventory and receiving payment from retailers. It is also helpful for businesses that want to receive volume-based discounts by placing larger orders to support all of their sales channels. This works best when done on a quarterly or other regular basis and can help to prevent the stock-out issues that hinder growth.

Inventory Funding through Kickfurther 

For physical product companies (CPG companies), or those producing shelf-stable consumables, a growth funding option that provides larger amounts than traditional financing and at faster speeds is inventory funding with Kickfurther. 

Kickfurther is an inventory funding option, where the manufacturing costs are sent directly to suppliers, and paid back as the inventory sells. This payment system aligns better with natural revenue cycles than does the immediate repayments many traditional and online loans feature. Funding inventory through Kickfurther prevents growing businesses from having to pinch cash on hand and choose between paying for additional inventory or investing in the marketing, equipment, and staff needed to grow.

What are the benefits of working with Kickfurther? 

  • 30% lower costs: 

○ When you compare our rates to other forms of funding, you’ll often see you’re saving. Companies returning to fund additional deals often see their rates fall each time. 

  • Higher funding opportunities: 

○ We have an average funding of $78,000 but can fund up to $2MM to 

manufacture new inventory or get reimbursed for current stock and reinvest in where your business needs it most. 

  • Funded in Minutes:

○ Once approved, our community of backers fund most deals within a day, often within minutes to hours. 

  • Custom Payment Terms: 

○ Businesses create a custom payment timeline of 1-10 months based on their expected sales cycles, with no payments until you start making sales.This alleviates the cash-flow bottleneck lenders cause without customized repayment schedules. 

 

Interested in inventory funding through Kickfurther? Create a business account today.

 

How to Leverage an Inventory Line of Credit

Posted on by Amanda Levine

Product-based businesses need inventory in order to survive. However, one of the biggest challenges they face is affording inventory while keeping operations afloat. Businesses often use an inventory line of credit to afford inventory without taking away from operations and growth. While a line of credit or other financing may come at a cost, focus on the growth you’ll be able to achieve as a direct result of healthy inventory stock and cash flow. An inventory line of credit is not the only solution for funding inventory though, be sure to do your research. A little bit later we’ll cover an alternative solution for inventory funding. 

What is an inventory line of credit?

A line of credit specifically for inventory is similar to a traditional line of credit. The main difference is that it’s secured by inventory purchase. Repayment terms may also be structured around inventory selling, which can offer more flexibility. On the downside, since lenders understand that inventory needs to sell before money borrowed is repaid (in most cases) they may charge higher rates and fees. A line of credit can be compared to a credit card. As an example, let’s say you have a credit card with a $5,000 limit. You can spend up to $5,000 on the credit card – as long as you keep up with monthly payments. Monthly payments can vary depending on the usage of the credit card. 

How does an inventory line of credit work?

An inventory line of credit is a line of credit that is secured by inventory. By using an inventory line of credit you can avoid borrowing against business or personal assets. However, if you default on payments, the lender can seize your inventory. A line of credit comes with a limit. While the credit line is open you can draw any available amount as needed to purchase inventory. For companies that need constant access to cash for inventory, a line of credit can be a good solution. It can also be a good solution if you’re struggling to qualify for traditional term loans and other financing options. Inventory loans present risk for lenders since the borrower typically needs to sell the inventory to repay the loan. Therefore, they may be harder to qualify for in general. Keep in mind they come with fees and interest too which will drive up the cost of goods sold. 

Common uses of an inventory line of credit

An inventory line of credit is generally limited to only being used for inventory. A general line of credit on the other hand can be used for most business expenses. The biggest advantage of an inventory line of credit is that it helps free up cash flow so that you can cover operating expenses and grow your business. Business owners face unforeseeable expenses everyday. Having access to cash that you may or may not need provides an extra layer of support. As a business owner, being proactive is always a good idea. 

What types of businesses can qualify for inventory financing?

If your business sells inventory, then you may be a candidate for inventory financing. Keep in mind, there are several types of financing and funding available. Depending on your situation and industry, the best type of inventory funding may vary. Below are some industries that qualify for inventory funding. To learn more about each industry, click on the links below!

How to qualify for an inventory line of credit

Qualification requirements can vary depending on the lender, but in general you’ll typically need to meet the following requirements:

  • Minimum time in business (6-12 months in most cases)
  • Must sell products or raw materials 
  • Meet inventory minimums (if set by the lender)
  • Provide proven sales
  • Personal credit score requirements may be considered

Most lenders can share basic requirements prior to submitting an application. To ensure you are working with the right lender or source, find out what requirements are involved before applying. 

What is the best way to finance inventory?

The best way to finance inventory is the one that costs the least amount, yet provides the most flexibility. The type of financing that matches this description can vary depending on what you qualify for. In most cases, term loans offer better interest rates than a line of credit, but can be harder to qualify for. Luckily, in today’s world, business owners are not stuck with traditional bank loans and means of financing. Startups and small businesses often reach out to backers and private investors for funding. You may want to consider alternative options for inventory financing. 

Is an inventory line of credit right for you?

A line of credit for inventory sure has its benefits. But as you know, there’s always a downside too. Ultimately, you may need to borrow money to grow or maintain your business. Whether you’re a startup that needs inventory to grow or a seasonal business experiencing a lull, financing can help overcome challenges. Sure, it comes at a cost, but what opportunity does it deliver? When determining if an inventory line of credit is right for you, consider the opportunity, but consider the risk too. Can you repay the loan? Are you confident about how much inventory you need? Will profits increase or decrease with additional expenses? By the time you apply for inventory financing, hopefully, you have some data to help you make decisions. Inventory financing can help businesses, but it can destroy them too – if they are not managed properly. 

In some cases, an inventory line of credit may be the best option. However, in some other cases, it may not be. Consider your own needs, explore what’s available, and always keep your vision top of mind. 

How Kickfurther can help

Qualifying and affording inventory financing is often where business owners encounter challenges. Created by an entrepreneur that once faced these two challenges trying to obtain inventory financing, Kickfurther was born.  Kickfurther can help you get funding for inventory up to 30% lower cost than similar options. 

Kickfurther is the world’s first online inventory funding platform that enables companies to access funds that they are unable to acquire through traditional sources. For companies that sell physical products or non-perishable consumables and have revenue between $150k to $15mm over the last 12 months, Kickfurther can help. We connect brands to a community of backers who help fund inventory on consignment and give brands flexibility to pay that back as they receive cash from sales. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours. 

Closing thoughts

Being a business owner involves creativity. Some may think creativity only applies to the sales side of business, but trust us, it counts on the financial side too. You’ll have to come up with just the right formula to keep cash flow healthy. This may involve financing for some businesses, and that’s perfectly okay. In fact, it’s encouraged, but you’ll need to make sure it makes sense for your situation. Remember, if there’s a will, there’s a way. As a business owner it will be up to you to find the way. Hopefully, Kickfurther can be just the solution you need to fund inventory at an affordable cost. 

Interested in getting funded on Kickfurther?  Create a free business account, complete the online application, review deals, and get funded in as little as minutes!

Is invoice factoring right for your business?

Posted on by Amanda Levine

Invoice factoring provides business owners an alternative way to access working capital without having to rely on traditional means of financing such as credit cards or business loans.

There are a number of considerations to keep in mind when determining whether or not invoice factoring is right for your business.

What is invoice factoring?

Invoice factoring can provide businesses with an influx of cash while they wait for invoice payments from customers and clients. Invoice factoring allows business owners to sell invoices at a discount to a factoring company for cash. In most cases, the factoring company will get paid within 30 to 90 days. Invoice factoring is not a loan, but can certainly improve cash flow. For example, if you’re a contractor that needs to complete a $10,000 invoice project, you could sell the invoice in order to have enough cash to complete the project before payment from the customer is received. 

How does invoice factoring work?

Invoice factoring allows business owners to sell their invoices (at a discount) to an invoice factoring company who will then receive the payments from customers as they come in. Selling your company’s invoices in bulk results in a lump sum of cash that can be used to cover your business operations and other expenses. On the downside, you’ll no longer have the right to collect on your invoices and may bring in less money as a result. Your invoices are surrendered to the financing company, not used as collateral. However, if you took out a loan you’d likely need to pay interest and fees so no matter which way you go, “borrowing” money is never free.

What type of businesses use invoice factoring?

Invoice factoring can be a convenient and efficient way of improving cash flow for businesses of all sizes.

Invoice factoring is best for businesses who deal primarily with other companies, and often have to wait for invoice payments from those companies to arrive. Receiving invoice payments from other businesses is different from receiving payments directly from customers. B2B transactions often result in the use of 30, 60, or 90 day invoices while customers typically pay upfront.

Companies who have trouble qualifying for traditional forms of financing can especially benefit from using alternative methods like invoice factoring that are easier to obtain.

How invoice factoring benefits businesses

Invoice factoring has a number of potential benefits to businesses in all stages of their growth and development.

  • Fast access to cash: Invoice factoring helps improve your company’s access to cash versus waiting for payments from other businesses and clients to come in. It’s also a much faster method of obtaining working capital than waiting for approval for a traditional bank loan.
  • Improving cash flow: Using invoice factoring can result in having access to large sums of cash up front without having to take out a loan. For businesses that need to fulfill orders or complete projects, invoice factoring allows them to access the funds they need to complete work.
  • Easy qualifications: Invoice factoring is typically an easier process than using traditional means of financing such as bank loans. While your clients may need to meet certain qualifications in order to ensure that the invoice factoring company is satisfied, your requirements are minimal.
  • Offers flexible financing: One good thing about invoice factoring is that it’s there when you need it. There is no long-term commitment, no need to put up collateral or a down payment, and little to no risk involved.
  • Convenience: Another benefit of invoice factoring is that it takes away the hassle of having to constantly follow up with your clients and manage the collection of payments. Instead, your invoice factoring company will handle all of this for you. Of course, you sold them the invoices at a discount so there’s reward involved for them.

Pros and cons of invoice factoring

There are a few advantages and disadvantages to consider when evaluating whether or not invoice factoring is right for you. Pros and cons can vary depending on your specific situation. Here are some pros and cons of invoice factoring.

Pros:

  • Fast access to cash 
  • Improve cash flow 
  • No collateral required 
  • Flexible and convenient 
  • Provides the funds you need to complete projects or orders

Cons:

  • Hefty fees may be acquired (depending on the factoring company)
  • No guarantee that the factoring company will successfully collect on invoices
  • You may have to buy back or replace any unpaid invoices
  • Loss of revenue (since you have to sell the invoice at a discount)

What is the cost of factoring invoices?

The total cost of using invoice factoring services for your business will vary from company to company.

Generally, business owners can expect to encounter a variety of fees in the process of factoring invoices including application fees, processing fees, credit check fees, and late fees. In addition, the basic cost of doing business, known as the factoring fee, can run from 1% to 5%, depending on the invoice amount, the creditworthiness of your clients, your company’s sales volume, and other factors.

Invoice factoring vs. invoice financing

Invoice factoring and invoice financing are both reliable and convenient ways to convert your business’s unpaid purchase invoices into cash. However, there are some significant differences between the two.

Invoice factoring takes the bulk of the responsibility off the business owner, as the invoice factoring company then handles the collection of the invoice management and payment. When you work with an invoice factoring company, your invoices are surrendered in bulk in exchange for a lump sum of cash.

On the other hand, companies who use invoice financing retain the responsibility of payment collection from their clients and are granted cash upfront in exchange for the promise of repayment. The invoices are used by the financing company as collateral to help ensure the repayment of the cash advance.

Tips for qualifying for invoice factoring

Whether or not you will qualify for invoice factoring depends on a few key considerations. Invoice factoring companies may take a look at various aspects of your business including your sales volume.

The advantage of using invoice financing is that your approval is not dependent upon your personal or business credit history, but rather the credit history of your clients and customers. This means that even new businesses, struggling businesses, and businesses that have exhausted other means of financing such as credit cards and loans can still qualify.

Is invoice factoring right for your business?

The question of which type of financing is best for your business will depend on a few considerations. Do you prefer to be hands-off when it comes to payment collection, or do you wish to remain in control? Do you qualify for invoice factoring? Are the fees manageable for your business?

Invoice factoring is a good option for many businesses. Any company that has their cash tied up in unpaid invoices can benefit from improving their cash flow with invoice factoring or invoice financing. 

For product-based businesses there may be better financing options available.

How Kickfurther can help

While invoice factoring may work for service-based businesses, product-based businesses may be better suited with other methods of funding. One solution for product-based businesses that need funds to stock inventory and fulfill orders is Kickfurther. Kickfurther is the world’s first online inventory funding platform that enables companies to access funds that they are unable to acquire through traditional sources. For companies that sell physical products or non-perishable consumables and have revenue between $150k to $15mm over the last 12 months, Kickfurther can help. We connect brands to a community of backers who help fund inventory on consignment and give brands flexibility to pay that back as they receive cash from sales. 

Kickfurther can help startups fund millions of dollars of inventory at costs up to 30% lower than the competition. With more than $100 million in inventory funded to date, Kickfurther can help you get funded within a day or even minutes to hours. 

Closing thoughts

While businesses can generate healthy profits, cash flow is always a challenge. Most businesses need to use one or more methods to improve cash flow. Whether you use invoice factoring, a business loan, a line of credit, or inventory funding – or perhaps some combination of these choices or others, if managed properly funding can help grow your business.

Interested in getting funded at Kickfurther? Here are 3 easy steps:

#1. Create a free business account

#2. Complete the online application 

#3. Review a potential deal with one of our account reps

#4. Get funded in as little as minutes

Create a free business account at Kickfurther today!

How your business can benefit from outsourcing fulfillment to a 3PL

Posted on by Amanda Levine

Fulfillment is one of the most challenging parts of running a small business. As your business starts to scale, trying to ‘do it on your own’ could be to your business’s detriment. Outsourcing your fulfillment needs to a third-party logistics service (3PL) can save time and resources as you expand.    

What are fulfillment services?

A fulfillment service is a third party logistics company that stores, preps, and ships your orders for you. When you are balancing a growing team, working in small spaces, or feeling overwhelmed, investing in fulfillment services may be a great option. Once items are received, critical business decisions are driven by inventory status and availability.  Staying on top of this can be difficult as business owners are often focused more on growth than the intricacies of a logistics flow. 3PL services offer inventory tracking and its progress, while also updating stock constantly and keeping accuracy at the forefront. Challenges come when running a high growth business, so it may be beneficial to offload your fulfillment challenges to a 3PL service.

This strategic and necessary upgrade can result in massive gains for any size business.  Fulfillment services like Saltbox work hard to manage receiving, inventory storage, processing, and most importantly shipping.

What to consider when choosing a 3PL

Not all 3PL’s are created equal. From hidden costs for onboarding and membership to pricing based on square footage and inventory, many 3PL services prioritize large ecommerce companies over growing small businesses. Finding the right 3PL service that offers the most support for your business at the most affordable cost is key to growing your small company into a booming enterprise.  

Customer Success 

Fulfillment requires working hand-in-hand with a dedicated team that you can trust with your inventory. The right partner makes this easy and provides a personalized experience dedicated to your business success.  Saltbox is a premier 3PL partner that guarantees customer satisfaction and communicates with appropriate stakeholders as needed.  Their services allow you to focus on growth while they focus on securing your logistics and order fulfillment.

Pricing 

Choose a 3PL that has transparent pricing structures.  Hidden fees, and order minimums should not stall you from growing your business.  When choosing a 3PL try to consider pricing based on storage rates, packing, shipping, and hourly rates designed for special projects. Pricing should not take you for surprise, and all costs should be reasonable and predictable on a monthly basis.  

Proximity

Proximity is a critical component when choosing the right partner.  Their location should align with your current business structure. Our recommendation is to find fulfillment services close to major cities, your manufacturer or distributors, and last mile delivery to the local area.  A bonus is if you can be close to your fulfillment team to keep your business hands on and allow you to check in on your own inventory.

Multi-Channel Reach

Don’t let multiple platforms stop you from expanding your business potential. With fulfillment support, you will be able to reach new audiences. Direct to consumer orders can be supported as well and land your business ahead of the curve. 3PLs can support your business with platforms like Etsy and Shopify. With support across multiple channels, the right 3PL service will make managing your logistics simple.  

The Bottom Line 

Not all 3PL providers are right for your business. It is critical to do sufficient research when looking for the right partner to help you achieve your business goals. Choosing the right 3PL is not the work of a day, and you should feel empowered to make informed decisions after your search. Ask yourself where your business is right now, but more importantly understand where it is headed. Fulfillment services can allow you to focus more on growing your business and less on logistic challenges with a 3PL partner. 

If you feel confident about fulfillment services, consider expanding with a 3PL that offers a micro-fulfillment center within a co-warehousing facility. At Saltbox, you can work alongside your micro-fulfillment center in office and warehouse space. Additionally, as your orders and business grow and scale, Saltbox’s solutions will grow with you. The Saltbox difference is having a partner that operates as an extension of your team that understands the challenges of various size operations. Saltbox can help alleviate stress related to logistics services making it easier to run the most important parts of your business.

Saltbox serves as an invaluable resource for small businesses nationally.  Saltbox offers key fulfillment services and can benefit your growing business by focusing on personalized needs that many 3PL services overlook. When choosing a 3PL, make sure they are an extension of your business and can provide you with personalized solutions and offerings. No need to build your business on your own. Get started with Saltbox Fulfillment and let’s grow your business together.