Do you have an online business that earns revenue through the Amazon marketplace? Then you’re probably receiving payment for your sales after a period of not less than 30 days. That could really make your cash flow tight, the replenishment of inventory difficult, and lead to a lot of questions from your vendors.
Now the greatest online selling platform, Amazon, is not only the way of life for consumers in America but also in the whole world. It offers manufacturers, producers, and retailers an opportunity to sell their products globally.
With more than $100 billion net sales per year, Amazon is the matchmaker in making e-commerce easier, quicker, and more efficient. The expansion of fulfillment centers and the coming of drone technology is enabling the online platform to connect retailers with their customers faster.
That’s especially great if you’re selling your products through the Amazon Vendor Central. However, the sad part of the story is that the company uses its power to extend payment terms. Today, retailers have to wait for between 30 to 60 days to receive payment from Amazon. This can really take a toll on your cash flow and growth ambitions.
Challenges of Amazon’s Payment System
With the waiting period to get payment comes a myriad of challenges that you face when you’re selling on Amazon. They include:
- Slow growth
- Having to pay shipping expenses for your clients
- Limited credit to expand your business
- Increased orders making you require more cash
- Problems in replenishing your inventory because of cash flow problems
- Having to pay for advertising fees
As such, you need to get a firm that funds your business. Otherwise, it would crumble to the ground. Fortunately, there’s a program called the Funding for Amazon Vendors that can help you alleviate these problems without having to get a loan or close down.
Get Paid Faster
Factoring is a very effective way for you to receive faster payment if you’re contracting for Amazon. With it, you receive faster payment on your invoices without the hassle of applying for a bank loan. Here are some great benefits of working with a reputable factoring company:
- 24-hour funding on receivables
- Advance payment of at least 90% of the invoice amount
- Free back-office services such as credit analysis and collections
- Quick and easy account setup
- Debt-free funding that is scalable to match your business’ growth
How It Works
You can receive funding on your receivables within 24 hours! The process of factoring works in the following five simple steps:
- You perform a service for Amazon
- Send your invoice to the factoring company of choice
- Receive 90% or more of cash advance on your invoice
- The factoring company then collects full payment from Amazon
- The company subtracts a fee from the rest of your payment and pays you the amount
How to Go About It
Thousands of small and medium online businesses have adopted Amazon vendor factoring as their main financial and growth strategy. Of course, you can do the same. However, you need to consider some factors before beginning to involve a factoring company in your business. Here are tips that can help you in this.
- Grow your business. There those times when you badly want to grow your business but there seems to be no way out. Maybe customers are asking for fast moving products but you do not stock them yet because of lack of capital. Or your stocks get cleared quickly and late payments from Amazon are stalling your progress. If you do not qualify for a bank loan at this time, why not contact a factoring company? Within a 24-hour period, you’d have your money. You only need to prove that Amazon approved of your sales.
- Weigh factoring cost before sending your invoices. Before putting pen to paper, you should know how much the transaction would cost you. The good thing about the factoring process is that it is very transparent. You can know the amount of cash you’re going to receive, when to receive, and the charges to incur. If you consider that the transaction is not making sense, withdraw from it.
- Settle your employee’s salary on time. It is important to pay your workers on time. They may not be patient enough to wait for your Amazon payment to come before you give them their dues. If you’ve run out of cash and end month is around the corner, then send your invoices to a factoring company for funding.
- Settle your vendor’s dues and advertising fees. Before beginning an online business, you should arm yourself with enough capital or look for bank loans. However, if you find yourself in a position where you can’t settle some bills, factoring is the answer.
- The use of capital. If you’re going to access a good cash flow through factoring, then use it properly to the benefit of your business. Replenish your inventory, pay employees, undertake marketing initiatives, and service orders with the fund. Just be innovative in investing the money. However, keep in mind that the process of factoring your invoices costs you some money. Therefore, do not get into the process if you have other revenue sources. It would be unwise.
- Bank loans can be cheaper. Even though factoring is very resourceful for a number of reasons, there’s a percentage fee that you must pay your factor. This is somehow different from the way you pay interest for lines of credit or bank loans. It is possible that factoring your invoices could be more expensive than opting to take a loan. If you have an established credit, a clear scope for the investment, and enough time to wait for an approval, why not apply for a loan or credit card? It could be better.
- Be patient until you’re paid by Amazon. The processing of payment by Amazon is just a picture of how other online marketplaces do business. So, do not panic when your cash isn’t flowing in fast. If you have other sources of revenue, don’t run to a factoring company for help. It would only cost you more money.
The cash flow problems that sellers on Amazon face can bring a lot of challenges. If you do not have other revenue sources to address them, then go for the factoring option. Otherwise, the best option remains to be looking for a bank loan or contacting other lines of credit.