Most business owners judge success in terms of profit but without steady cash flow, even profitable companies can go bankrupt. The following statement illustrates how accounts receivable factoring not only stabilizes cash flow but also increases profits. With access to unlimited funds, ABC was able to accept new business and double its revenues from $100,000 to $200,000. This in turn, resulted in a net profit increase of 8%, even after factoring fees were paid.

Sample Income Statement ABC Manufacturing Company

Before Factoring
After Factoring
Gross Revenues
100,000
200,000
Cost of Goods Sold
60,000
60%
120,000
60%
Gross Profits
40,000
40%
80,000
40%
Less:
Variable Expenses
15,000
15%
30,000
15%
Fixed Expenses
20,000
20%
20,000
10%
Cost of Factoring
0
5,000
Total Expenses
35,000
35%
55,000
28%
NET PROFIT
5,000
5%
25,000
13%

We urge you to use this interactive cash flow calculator to see how reducing your collection days can positively impact your cash flow.

Related Content:

Cash Flow Explained Part 1 Cash Flow Explained Part 2