What A Factoring Company Can Do For Your Business
The thrill of the chase and hunting down orders is what drives most businesses, but once the deal is captured what happens next often presents big problems – that’s where a Factoring company comes in.
Traditionally, companies have an overdraft to ease cash flow, but for a growing business with an expanding order book, often this is just not a flexible enough solution.
Teaming up with a Factoring company to handle your sales ledger is a more effective option because your credit grows with your order book and you don’t have to keep back cap in hand to the bank to renegotiate borrowing.
How much cash could you release from your unpaid invoices?
What does a Factoring company do?
Every time you raise an invoice, you send a copy to the Factoring company.
Usually, within 24 hours, they will prepay about 85% of the invoice value in to your bank account.
You carry fulfil your orders and chase more sales while your Factoring team collects payment from the customer, deducts a service charge and interest for the prepaid invoice amount and sends you the balance.
How does this help my business?
In simple terms, your business growth is restricted by your ability to pay for supplies before the customer pays your invoice.
To overcome this pinch point in your business cycle you have to implement a credit control management process, which costs time and money you don’t have because your cash flow is tied up with orders.
This is where the benefits of Invoice Factoring over an overdraft, bank loan or other equity finance are attractive to a lot of small to medium sized businesses:
- Factoring turns your unpaid invoice debtors in to cash flow by paying out every time you issue an invoice and as your order book grows, so does your credit.
- Your Factoring team looks after sales ledger control and administration. They help put effective credit control systems in place, manage your sales ledger and chase slow payers. You don’t need to worry about this back-office process because it’s in reliable hands.
- A Factoring company will not secure credit against your business or personal assets or call in your debt.
- If a Factor takes on a large batch of debtors at the start of your arrangement, then you have an immediate cash flow injection.
Don’t forget Invoice Factoring does not replace keeping your own business and accounting records. Every business should have an up-to-date picture of its finances and has an obligation to the taxman as well.
How do I choose a Factoring company?
Look for advice from an independent professional, the same way you would go to an independent financial advisor for pension or investment advice.
An independent Factoring company, such as Touch Financial, will have insider market knowledge and can guide you to a partner that best suits your needs.
One of the last places you should look is your own bank – putting all your business financial eggs in one basket is not a good idea, especially in the current financial climate.
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Every month Touch Financial help businesses improve their cash flow with invoice finance. Request a quote to find out how much extra cash you could raise.
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