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 find solutions to keep operations active and finances in order is therefore an increasingly frequent need for managers.
In this context, there are tools that entrepreneurs can use to help balance their accounts and avoid debt. Among the most common is the anticipation of receivables. This is the option we will discuss in today’s article. Continue reading, learn all about the anticipation of receivables and find out when it is worth requesting this resource for the benefit of your business.
What is receivables anticipation?
Anticipation of receivables is the advance payment of commitments made on credit cards – such as installment sales on credit cards, post-dated customer checks, purchases made using installment plans and invoices, which are transformed into immediate liquid resources. 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 companies or factoring companies, which assume responsibility for the future receipt of the negotiated amounts and transform these commitments into liquid cash for the company. In this process, however, there are fees and discounts charged on the advanced amount.
How does this anticipation work?
To understand the dynamics of receivables anticipation, it is worth comparing it to the anticipation of Income Tax (IR) or the thirteenth salary, offered to individuals by financial institutions. The process is quite similar, although the anticipation of receivables is requested only by legal entities – whether they are micro-enterprises or larger companies. The costs involved include possible fees charged on the anticipated amount and interest rates – which are charged by the institutions that advance the amounts to the companies.
Interest rates usually vary according to the time required to clear the credits to be received. Imagine, for example, that your company performed a service worth a total of R$1,000, which was paid in 2 installments on the credit card by the customer. By anticipating this receivable, you will pay interest over this 2-month period – which will be the maximum period for the institution that will perform the anticipation to receive the installment amount. If the purchase was paid in 6 installments, however, the incidence of interest will be higher.
Therefore, when requesting an advance on receivables, it is essential that you know the costs involved in the operation. This way, you will be kept informed of the procedures and avoid unpleasant surprises when paying the operation charges.
What are the advantages of anticipating receivables?
Anticipating receivables offers a number of advantages to companies. Compared to other lines of credit available on the market, anticipating receivables is usually cheaper, since the funds being used come from the business itself. In addition, the process of anticipating funds is usually quite fast, allowing the entrepreneur to use the money to settle the company’s debts and avoid debt or financial difficulties in the short term.
The risks of the operation can also be reduced, especially in cases where payment is guaranteed, such as in installment purchases on credit cards. Using the option of anticipating receivables, therefore, allows the entrepreneur to solve an immediate difficulty involving the company’s finances and balance its cash flow in a short space of time and at reduced costs.
What are the disadvantages and risks of receivables anticipation?
Although this resource is quite useful for companies of any level, it is important to emphasize that there are disadvantages and risks involved in the operation of receivables anticipation. Therefore, it is essential to analyze all scenarios – and all available possibilities – before opting for receivables anticipation. Among the main risks of this process is a possible failure to comply with payment obligations by the company’s customers.
In certain cases – in which payment in installments has not yet been confirmed, such as in sales via installment plan or post-dated check, the lack of payment can negatively impact the company that requested the receivables anticipation. When this occurs, the company may have to pay the outstanding amounts and even have its name included in credit protection agencies. Due to this risk, it is essential that the entrepreneur considers the profile, history and reputation of the payer before requesting the anticipation of receivables for a payment 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 payment of receivables compared to other lines of credit – which can also have a negative impact on the business’ cash flow. To avoid this problem, it is essential that the entrepreneur knows all the fees that apply to the operation and compares them with other credit options available on the market.
