Why Use Us?
|Borrow cash to cover the cost of producing orders at low costs (from 0.9%)|
|Offer credit facilities to your customers, orders are easier to win if you can provide 30 days or more to pay.|
|Invoice Finance drastically reduces cash flow pressure enabling your company to breathe.|
|The factoring company will chase any bad debts letting you concentrate on the important things.|
|Take the doubt out of buying, we deal with over 6 trusted suppliers.|
|Fast service, typically you will get your quotes within 1 hour, click here to start|
What Is Invoice Factoring?
It commonly refers to a company using a third party, such as a bank, to borrow against payment that it expects to receive from an invoice. These third parties charge a small fee in exchange for advancing companies this payment, then in turn handle collection from the client that owes the money. This accounting tactic essentially makes it easier for companies to manage collection of outstanding accounts receivable.
There are two types of factoring: recourse factoring and non-recourse factoring. Recourse factoring means the customer will be responsible for any debts to the factor. Non-recourse factoring provides extra insurance with a service called Bad Debt Protection, which will prevent any outstanding amount from being transferred to you in case your customers can’t pay back their debts.
The benefits of this advanced invoicing provision range from stabilizing revenue and maximizing overall profit, to improved cash liquidity and more.
Better Cash Flow Management
It is very common for a business to experience delays in production while waiting to receive payment from clients. In effect, slow revenue can limit both the speed and volume of your business transactions. It’s difficult to operate during these forced waiting periods, as they can jeopardize your company’s ability to survive.
A conventional accounting system fails to address this cash flow pressure. Invoice factoring can reduce this pressure by providing the cash to cover overall costs each month.
Anyone who has owned a business knows that clients are sometimes late in paying past due amounts. Yet, even though you haven’t received these payments, you still have to meet payroll and pay suppliers and contractors in a timely fashion.
Many have found that factoring makes a major difference in resolving these cash flow issues. You’re free to purchase equipment, upgrade your distribution chain, and generally ply your trade as usual. Best of all, this freedom comes regardless of the speed at which your clients pay their bills. For a reasonable lending rate, you’ll have the power to meet each and every financial demand, even if your receivables remain unpaid.
Chasing past due debt requires a great deal of time spent on phone calls, letters and emails. Is this a particularly effective use of your company’s resources? A factor will take on this responsibility, reducing the economic and staffing costs that your company pays for collection activities each month. Traditional collections departments usually take up a good-sized amount of a company's payroll, and this can simply be outsourced at a lower cost instead.
Also, remember that outsourcing doesn’t necessarily have to mean reducing headcount. If firing people is your personal nightmare, remember that employees can easily be re-trained to work in an associated role. A collection agent, for example, can typically transition into a purchasing or accounting position with little trouble.
Management is always concerned with reducing ledger debt, and employing this technology will trim basic costs. Further, you’ll avoid paying potential legal expenses associated with significantly overdue debts.
Competitive Advantage In The Marketplace
Another benefit which invoice factoring brings to your business, has to do with market competition. Whether your clients are based in England, America, or Timbuktu, they’ve likely been affected by the poor economic conditions experienced in 2012. Everyone seemingly has budget issues, from Wall Street CEOs to web and internet entrepreneurs.
With a factor providing steady cash flow for your receivables, you can afford to offer 30, 60, or even 90-day payment terms to close a potential sale. Such rights are typically only reserved for the largest clients, but now you can offer a similar deal to small businesses as well. This is a real market advantage in a limited budget environment, and will aid your sales force in obtaining new business. Combined with a good product or service, more time to pay is a worthy proposition indeed.
When choosing which company to do business with, many commercial organizations view value and customer service as key factors. Flexible invoicing lends a helpful hand, by showing sensitivity to your client’s unique situation. Being united with your client to resolve their concerns is a hallmark of customer service, in any industry.
What You’ll Need To Get Started
Getting started is faster and easier than you might think, and it doesn’t require any collateral. All that’s required to apply for invoice factoring, is an invoice which is dated on or after the day you delivered your products or services.
The invoice should clearly state which goods or services were delivered, and to whom. It should also show the credit terms you're offering, and the date on which you expect accepted payment to clear. Finally, if you’re VAT registered, you should also provide your VAT registration number, the rate, and how much you’re charging. Provided you have the proper articles, it’s a fairly straightforward process. Once approved, factor invoicing can typically be up and running in 7 to 10 days.
What A Factor Will Actually Do For You
First is the finance element, where a factor will provide you with advances of up to 85% of the value of your invoices. This is a significant percentage - once you consider what current collections efforts are costing your company in man hours and related costs.
As industry experts, factors rely on years of specialized knowledge and experience to pursue the money you’re owed. If it is having particular difficulty collecting, a factor will suggest an appropriate alternative course of action as well. By assuming this task, a factor allows your company directors to focus upon more important activities such as distribution, developing new markets, etc.
One of the methods a factor will employ is to perform background checks, to ensure that you’re doing business with creditworthy customers. This is especially important if a majority of your revenue comes from a relatively small number of larger customers.
Finally, many factors have simple service contracts that will easily integrate with your existing accounting systems, and serve a variety of different industries. Once a product or service is purchased, you simply mark it as sold. From that point, the factor handles collection from your client debtor and sends you a statement summarizing the activity in your account each period.
How Much Will This Cost?
Total cost varies based on the specific agreement you sign with a factor, and there are two types of fees. First is a Discount Charge, which is akin to interest on overdraft and is calculated based on the amount of money the factor provides. Second is the Service Charge, which is for sales ledger administration and covers all associated collections work performed on your behalf.
Use A Trusted Partner
It’s important to contract with a professional, reliable factor if this is a method you wish to pursue. This is not as simple as finding banks or government lenders that will advance you the money. Remember that these factor agents will be interacting with your customers directly, including your local and even overseas clients.
Thoroughly checking each candidate’s background is important, which you can do by asking a few key questions. For example, does their general customer service policy match your own? Are they considered reputable leaders in the lending industry? How experienced are they in dealing with the types of clients you have?
Also, establish minimum standards ahead of time for what you require in a factor. Otherwise, you may end up with regrets in the near future, after signing a service contract with unfavorable terms.
Get Free Comparison Quotes, Right Now
Most business owners would agree that achieving success requires a combination of well protected assets, consistent growth, and the ability to collect on what you’ve sold. Yet, traditional collection efforts can be costly, and thus run counter to achieving expected results. Luckily, factor invoicing is widely considered a cost-effective alternative for managing your collections process.
After covering the information above, you've discovered how invoice factoring can greatly benefit your business. At this point, you may want to take advantage of this effective tactic, to boost your profits and streamline your operation. If that's the case, the good news is, you have access to a powerful tool. Using our convenient price comparison option, quotes will be delivered to you directly - with no obligation or special login required.
In just minutes, you can obtain factor invoicing quotes from such trusted lenders as Lloyds TSB Commercial and Hitachi Capital. Simply fill out the short form below, and you’ll quickly receive this valuable information - without all of the extra hassle or wasted time that comparison shopping usually involves.
So, why not get your online price quotes today, as you’ll be able to choose from a range of trusted lending sources? Your business will immediately benefit from the financial security that a steady cash flow provides - increasing your productivity and improving your overall bottom line. Click here to start
Are you ready to give your business immediate flexibility and a cash injection? Click here to compare quotes now!