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Should a manufacturing company use purchase order financing

Manufacturing companies often have a difficult time purchasing the supplies they need to keep their business alive. Purchasing the supplies and equipment they need to create the products for their customers is very expensive and without the funds to purchase the initial raw goods, they will be unable to fulfill their orders.

In the end the manufacturing company needs to find a way to be able to have the money needed to purchase the supplies and help their bottom line. Many times you can find the needed funds from your own customers. There are a lot of people that fail to pay their bills on time and this can really tie up your cash flow and make it hard to find the money you need in order to purchase the raw goods. One option you have is to start working on increasing your cash flow shortages. Bring in an option that allows your customers multiple payment choices so they can actually afford to pay their bills. Credit cards, checks, cash, and purchase orders are all great options that help customers afford the bills they need to pay. Instead of giving them 60 days without interest, give them 30 days and then start taking on interest as it will allow you to gather more money and to hopefully get the money back into your bank account sooner than waiting on the customers to pay on their own power. The other thing you should remember is that customers need reminders so you may want to create a collection department that will be in charge of contacting the customers and getting the funds from them, even if it is only $30 at a time.

If you need to purchase supplies for your company, a great way to do this is by using purchase order financing. Purchase order financing is a great option because you are able to purchase the supplies you need without using credit cards and loans to gather the funds. What you will do is to contact a factoring company and work out an arrangement where you are able to get cash or a line of credit in order to purchase the goods you need. This is often called a "non-cancelable purchase order" and it means that you will continue to work with the company and you will not be able to terminate the agreement. How you get paid by the customer is by getting the raw goods, manufacturing them and then delivering them to the client. The purchase order company gets paid, and you get paid minus the fee about or you can get paid from the client but you must first repay the factor before using the money for other things.

Why is purchase order financing so successful? You are able to get the funds you need for the company without needing to ask the bank for a new loan and you are able to create new jobs but to keep your cash flow in the green. Keeping the cash flow out of the red is vital since it is considered the lifeblood of your organization and it must be running effectively so you have money to pay your staff and to also pay your creditors and others.

Now you do not need to wait 3 months for your customers to send you a payment for an order that you completed months ago and supplies you have purchased long ago. You have the money right away and it makes it much less stressful on your team as you have the operating capital you need to have an effective company.

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