Invoice Factoring

[Highland Forestry]

I'm persuing the route of leaning on the bank for a bigger overdraft at the moment... the invoice factoring is an option, but I don't like the idea of having to put every invoice through them.

 

Doug - the haulage admin and payment terms is the easy bit!!

 

The difficulty arrives when you are relying on clients and others arranging haulage and sending lorries in regularly enough to keep your cashflow going.

[mark hughes]

we use invoice factoring at our building merchants, it does improve cash flow but be careful cos the bank / company put certain credit limits on each client so you cant draw down as much money as you expect plus in most cases they expect you to insure or stand any bad debts.

 

All in all good points and bad ones.

 

Hope this helps

[robbo 110]

be very careful, i know of two fairly big companies that are in trouble through using factor's, start of at 10%, slowly goes up, because it releases money that is in the 30,60,90 day system it seems good to start with, then they put there commision up, a guy i know who ran a car haulage company was paying 40% when he went bust, the 10% is a lost leader, keep trying with your bank mate, good luck

[Stephen Blair]

I'm persuing the route of leaning on the bank for a bigger overdraft at the moment... QUOTE]

 

Matt getting a bigger overdraft doesnt improve cash flow, it just makes people more dilusioned that their company is running well.

And if you factor then all this NEEDS to be added onto the bill to your customers, not taken out of your profit.

The problem needs addressed at the source, the only way you can have good cash flow is if you run your business the same way as your clients run theirs. You do not pay ANY bills until you get paid.

You will not think this is fair as you would not treat others the same way since you have good morals:001_smile:, but you are in bed with business people, not mates.

[David Riding]

I'm persuing the route of leaning on the bank for a bigger overdraft at the moment... the invoice factoring is an option, but I don't like the idea of having to put every invoice through them.

 

I would look into Invoice Discounting before factoring, factoring will mean the company will continuously hound your client for the money which will annoy the hell out of them. It may give the client the impression you are a badly run company as you dont have any capital in the bank, and that you should not be taking on jobs if you have not got the cash flow I know this is not the case and your company is run well and you are just an expanding company, but the client may not see if this way. Invoice discounting will cost about £4k a year for a £500k turnover company and they will give you 80% of your invoice amount the day you raise it, and your have 90 days to give them back the 80% plus about 3% commission. With Invoice discounting the company never have any contact with the client.

[Highland Forestry]

I would look into Invoice Discounting before factoring, factoring will mean the company will continuously hound your client for the money which will annoy the hell out of them. It may give the client the impression you are a badly run company as you dont have any capital in the bank, and that you should not be taking on jobs if you have not got the cash flow I know this is not the case and your company is run well and you are just an expanding company, but the client may not see if this way. Invoice discounting will cost about £4k a year for a £500k turnover company and they will give you 80% of your invoice amount the day you raise it, and your have 90 days to give them back the 80% plus about 3% commission. With Invoice discounting the company never have any contact with the client.

 

That's an interesting one...

 

We'll see... I'm trying to make some changes just now to end up with a better cashflow, one of which will be catering for more of a domestic market on the fuelwood side which should mostly be payment on delivery or collection.

[Philipp16]

I've heard about it that it's a good alternative in financing a business and an assured cash flow for the business. In factoring leads, equipment leasing leads and equipment financing leads, they are trying to take advantage on invoice factoring or factoring.

[Highland Forestry]

I've heard about it that it's a good alternative in financing a business and an assured cash flow for the business. In factoring leads, equipment leasing leads and equipment financing leads, they are trying to take advantage on invoice factoring or factoring.

 

 

How is a website based sales leads company in New York able to offer anything positive to Invoice Factoring in the United Kingdom?

 

Plug your website elsewhere please!!

[windfall]

Its all very well saying if you have to use an invoice factoring company you must pass this on to your clients, in practice i found that this was not possible as it priced me out of the game.

 

My margins were tight so a 7or8% charge would have meant that it wasnt worth the hassle, i was dealing with the Government so RBS Invoice Factoring would have given me 90% of the invoice as they are AAArated, but they wanted to 'judge' each of my other clients on a client by client basis. They also wanted ALL my invoices from every area of the business through them, i couldnt just put the biggest head aches through them.

 

In the end i remortgaged my house and stuck the money in to the business.

 

From experience, if you are struggling with cashflow you need to look at your terms of business. You are not a bank so dont give people credit. Can you ask for payment up front? can you ask for half paid one week before the job starts and the rest on completion? At the very very least your payment terms should be no more than 7 days! This should be on your invoices, you should also have on the invoice you will charge interest for breach of payment terms. You will also find some people will pay within 7 days, dont ask you dont get....

 

You also need to have a proper system for debt chasing, if you have a member of staff who can do this great, sit down with them and tell them what you need doing. if not you must set aside time in the week to do this yours,elf I found Thursday or Friday afternoon was a good time to do this.

 

Even though my invoices said 7 days, i did the following, letters/invoice copies for clients at 30 days, calls for clients at 45 ish followed by a letter/invoice copy.

 

IMHO Any letter shouldnt be from you even if it is, i have found

 

Accounts Assistant

MyCompany

 

Works and distances you (who is trying to build and maintain a working relationship) from the debt chasing side.

[John Russell]

If you start using factoring, your clients will think you're in financial difficulties. Avoid at all costs.

 

If you want to get more money in there's no substitute for chasing customers hard. Don't be aggressive -- it's quite possible to chase and be pleasant about it.

 

Alternatively, rather than give 10% to a factoring company, why not offer a 5% discount for customers that settle up within the month? But don't let them take the piss -- the 5% is only to be taken if the pay promptly. A surprising number of finance directors and accountants are programmed to bite at that offer.