Invoice Factoring

[Highland Forestry]

Ok Guys..

 

I have been giving alot of thought into invoice factoring for the last couple of weeks.... does anybody else currently do invoice factoring/invoice financing, does it work for you?

 

How do you find the costs and percentages, does it have a big effect on your margin or are you able to swallow it?

 

How have you found your cashflow situation once using invoice factoring, does it help as much as the companies offering the services say?

 

 

Thanks,

 

 

Matt

[Rupe]

Whats invoice factoring??

[slasherscot]

a company pays him his invoices in 24hrs for a 10% commission........really depends how bad ur cashflow is, i found if keep everything tight for a few months until u get within ur payment cycle but ur bank should be ur first call. We all know the slow payers in the forestry business, contractors ended up financing estate and forestry management company jobs. waiting 90 days for ur money is a joke.

[Rupe]

Oh, I see. Sounds bad to be considerign that kind of thing. I've struggled with cash flow but not to those lengths, and usually for lots of small amounts, not big ones. Can't offer much advice then!! Good luck.

[ukminch]

I thought about it when I had a run clients owing for a long time but decided against it. The costs are stupid. You'd be better off not using certain clients if there payment terms are no good to you. Margins are tight enough without losing 10percent of the job, so prob 20-30 percent of the profit on it.

 

My FA reckons their used a lot by people to keep themselves out of liquidation if they suddenly experience a big dip, or big increase in work. As someone else has said theres cheaper ways to borrow the money, but it depends on your situation. I'd get some advice from an FA or an accountant that you trust before comitting to anything.

 

R

[Highland Forestry]

Thanks for the advice guys...

 

The problem I am finding is mostly slow payers, and other types of jobs where you have alot of timber sitting on roadside waiting for a mill to collect and so on...

 

It's nothing to have 20k worth of work laying next to a road waiting for a lorry to take to the mill, and then having to wait for the lorry to send in his ticket, then the weighbridge ticket and then you might be on 60 days from the mill if your unlucky... in the mean time you have had to pay cutters every week by the piece and you're left waiting..

 

I've found the banks to be extremely unhelpful just recently, and I really dislike being kept on hold for over an hour just to talk to an advisor about an account - absolute joke.

[Stephen Blair]

No no no!!

[Doug Blease]

Matt,

 

Doesnt sound like a good idea to me. I think you should just be more firm about haulage admin, and payment terms and conditions.

 

DB

[Stephen Blair]

Listen to Doug, thats great advice:thumbup1:

[slimbo]

I would try and avoid at all costs, I know sub contractors that went down that route, Yes they received their money quickly at a cost to themselves but the companies that supplied them with work soon stopped giving them work as finance departments get fed up of being hassled and threatened by the banks on a monthly basis which in turn leads to contract managers being leant on to use different suppliers, unfortunately its all part of the merry go round when working for large outfits with their terms and cash flows.