Learn How Factoring Can Keep You Business Alive in the Oil and Gas Industry
No matter the purpose of the business, it can be tough in the oil and gas industry staying afloat when the in-flow of cash is reliant on customers paying on time. The reality of this is difficult for many in the oil and gas industry no matter the size of the business. That is why businesses in this industry leave themselves vulnerable to financial hardship, a hardship that’s easily avoidable using oil and gas factoring.
The practice of factoring using a factoring company can keep money coming in more regularly instead of waiting for customers to pay for services received. There are several benefits of using a factoring company, yet it is important to know how to recognize a good factoring company to reap the full benefits of factoring.
Understanding How Factoring Works in the Oil and Gas Industry
A truth known to most in the oil and gas industry is that it can be difficult to stay in business when income earned is based on customers paying for services received, even though some customers make payments at their leisure. That is why those in the oil and gas industry opt to use factoring companies.
It gives oil and gas businesses the ability to sell their completed work invoices for instant money provided by the factoring company. By selling invoices to factoring companies any business in the oil and gas industry can receive at maximum ninety percent of the money owed to them while the factoring company holds on to the remaining ten percent of the invoice until the client pays the money owed on the invoice. At the time of payment, it is the factoring company that receives the money.
After receiving the client’s payment, the factoring company then pays the oil and gas business the remaining ten percent of the invoice after subtracting its fee for advancing the business’ invoice payment (Oil Field Factoring, 2019). Several companies in the oil and gas industry use factoring.
Businesses that survey sites for oil fields, conduct site preparation and maintenance, and even the businesses that maintain the pipelines all use factoring to stay in business (CBAC, 2019). By doing so they avoid financial hardships that can limit their growth caused by not being able to wait until a client pays their bill.
The Benefits of Factoring with A Good Factoring Company
Businesses in the oil and gas industry that choose to use factoring all enjoy the benefits that come with it if done using a good factoring company. By businesses using oil and gas factoring, they’re able to receive a consistent flow of money necessary to pay staff, as well as their own bills on time.
They are also able to grow their business and hire more employees. The most advantageous thing about factoring is that the bigger the business gets the less they have to pay in factoring fees by increasing how often they use factoring with the same factoring company (Oil Field Factoring, 2019). However, these benefits are enjoyed only by working with an experienced factoring company that can put your mind at ease in terms of being able to stay in business. It is important to work with a factoring company that is experienced and understands how the oil and gas industry works.
For example, a good factoring company will work to understand billing procedures honoring the agreement between the business and customer by not attempting to go into the collection before the agreed-upon 30-day, 60-day, or 90-day time period has passed. Having a factoring company that honors previously made agreements preserves the relationship between the client and business instead of jeopardizing it by trying to collect early (Oil Field Factoring, 2019). These are things to keep in mind when choosing a factoring company that works with you providing a steady flow of cash while keeping the business on good terms with the client.