by by Richard Barrington, Columnist
The expression "time is money" doesn't just mean that a person's time is valuable. In business, it also means that the timing of revenue streams translates to gains or losses in the revenues-per-transaction of the business. By stabilizing the timing of revenue realization, outsourced customer financing can add to the bottom line of a business.
In fact, the boost to the bottom line comes both from cost control and improved revenue timing, both of which can be accomplished if customer financing is outsourced effectively.
Cost and Revenue Factors
On the cost side, delays in receiving payment can become very expensive. Collection efforts are costly and distracting, and are generally bad for productivity and motivation. Ultimately, some defaults are bound to result.
On the revenue side, a dollar today is always more valuable than a dollar tomorrow. The time value of money is derived from the fact that cash in hand can then earn interest, meet cash flow needs, or be reinvested in the business. Every day that receipt of revenue is delayed diminishes its value. Chronic delays in receiving revenue will erode the revenue-per-transaction of the business as a whole, a key profitability factor.
Profitability translates into competitiveness. A more profitable business has enhanced pricing flexibility, is better able to make acquisitions or expansions, and is more prepared to ride out lean times. Each of these is a form of competitive advantage.
Finding a reliable provider of customer financing can reduce the headaches associated with revenue collection. With customized market services tailored to a particular line of business, the method of financing can match the needs of the business, making it more profitable, and therefore, more competitive.
Providing extra retail services like customer financing is more than just a potential gain in competitive advantage. If a business does not provide it the result could likely be a loss in competitive standing. More and more businesses are providing customer financing. This makes having that capability a necessity in keeping up with the competition.
Customized Market Services
Different types and sizes of businesses have different needs, and this is where customized market services come in. The competitive advantage of customer financing is optimized if the service is tailored to the needs of the business.
For example, GE Money, a subsidiary of General Electric Capital Corporation, offers customized market services for over twenty different types of business. So, no matter what type of business a company is in, it can obtain the competitive advantage of having customer financing available.About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.