Factoring is a financial transaction in which a business sells its outstanding sales invoices (sales debtors) to a factoring company (the Factor) at a discounted rate. The Factor then provides an immediate cash advance at a percentage of the value of the purchased sales debtors. This advance is generally around 75% to 80% of the net value of the sales debtors but can be as high as 100%. The balance of the purchase price is then paid, net of fees due to the Factor, once the sales debtors are collected from the customers of the business.
Whilst confidential invoice discounting has its advantages, the majority of the customers we speak to prefer to be completely transparent with their factoring involvement and believe that factoring provides them with everything they need to move their business forward without interruption.
Our customers have also found that leaving the invoice collection up to our factoring partners has meant that building a positive relationship with their own customers has been easier, because they don’t have to have the awkward conversations about when their invoices might be paid.
Companies taking advantage of factoring simply add their factoring partners details to the bottom of the invoice and any questions, queries or requests to delay payment go straight to the partner, saving you time and the negative effect that conversation can have on your relationship with that customer.
As with all forms of invoice finance, factoring gives you access to the money owed from the invoices immediately, and means your business won’t be held back by late payment of invoices as it could have been in the past.
If your company has ever had to wait for invoices to be paid to start new projects, you’ll know how frustrating this can be, but factoring removes that frustration completely. With cash sitting in your account as soon as you issue an invoice, you can more effectively plan, can speed up your processes, deal with more customers and make more money as a result.
Factoring also removes an awful lot of time spent chasing and processing invoices, and that time can be used more effectively elsewhere in your business.