Invoice factoring can be a useful method of obtaining finance for a company, but it is not a step to be taken lightly. Several points should be considered first, for example, what is the main attraction of factoring for your business, is it to improve cashflow problems and overcome difficulty in obtaining loans or to reduce business costs by eliminating your credit control staff? Whatever the reason, the first step is to determine the expense of billing and collecting. Secondly, determine what monies are being lost as a result of investments not made due to delays in accounts receivables being paid. With these two bits of information, the financial officer of a company is in a position to make an intelligent choice when shopping for a factoring company.
Before comparing prices, any adverse effects of going down the invoice factoring route have to be considered. To what extend does the business rely on maintaining close customer relations? Occasionally, the introduction of a third party into the supplier client relationship can cause waves. Customers may question whether your company is in financial trouble or whether they will continue to receive the same first-class service when billing questions arise. If this might be a problem, then choose a type of invoice factoring called discount invoicing. With discount invoicing, your company maintains control over billing and collections, but still receives a substantial percentage of the accounts receivables upfront.
Once you known what can be saved and what can be gained, the search to find the best rates can begin. Remember that, as important as cost is, the quality of the factoring company is also a prime consideration. By using discount invoicing as a means of “testing the water” a business can benefit from trying invoice factoring without any repercussions and perhaps later ease into permitting the lender to take over every aspect of credit control.
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