Factoring Future Cash Payments

Invoice Factoring is a method of business funding that allows businesses to receive payment for invoices within a day or two of them being issued. It’s a way of releasing cash that would otherwise be tied up in the sales ledger for weeks or months.

Factoring future cash payments could help the growth of your business by releasing cash immediately which would otherwise have been tied up in unpaid invoices. Cash is the essential lubricant of commerce. If your business is suffering from a lack of cash its operations will inevitably become more painful. When cash is in short supply it’s harder to pay suppliers and other creditors, and there’s increased pressure on management.One increasingly popular way for businesses to raise additional cash is through Invoice Factoring arrangements.

This is a long-established mechanism for improving cash flow, by unlocking the money tied up in the accounts receivable or sales ledger and allowing it to flow through the organisation. Factoring relieves the pressure that comes from being owed a lot of money by customers and which may be coming in at an unpredictable rate. It allows the business to focus on what it does well, its core activities, rather than chasing debts and worrying about how to pay the bills.

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How does Factoring future cash payments work?

Put at its simplest, Factoring is about selling your customer accounts to a Factoring company. They purchase the debt, paying you somewhere around 85% or 90% of the total amount outstanding.

This means there will be a large cash injection when you first enter into a Factoring arrangement. From that moment on, all invoices that you raise can be passed to the Factoring company who continue to pay the agreed percentage immediately. Responsibility for collecting the debt passes to the Factoring company. They prepare statements and undertake credit control, relieving you of this administrative task.

When your customer pays their debt the Factoring company pay you the remaining 15% or 10% outstanding, less a small processing fee.

Advantages of Factoring future cash payments

The benefits of Factoring your future cash payments include:

  • Improved cash flow, with up to 90% of the invoice value being paid immediately.
  • No assets are used as security for credit.
  • Credit control is performed by the Factoring company, freeing up your time and resources.
  • It’s a flexible arrangement.
  • Factoring services can be conducted confidentially, preventing your customers from becoming aware of it.

The importance of good advice

Factoring might sound like a good idea for your organisation. However, it’s important to understand all the implications and benefits before making a decision. It’s highly recommended that you take advice from independent brokers who have experience with Factoring products.

Touch Financial have been working with Factoring companies for years, helping to design and delivering financing solutions to our customers. Our approach is one of enlightened partnership because we believe in mutual benefit for all concerned. We’ve worked with a wide variety of organisations on financing solutions, including Invoice Factoring. Our experts are available to talk to you, on a no-obligation basis. Why not get in touch with us today and see what we can offer you?

To get more information on how Touch Financial can help you with Invoice Factoring, please take a moment to complete our simple online quote form. Or if you don’t like forms, call us on 0845 388 9725.

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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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