Every company has some months that are better than others, but invoice factoring can generate immediate income to stabilise cash flow. It is most often used to fund expansion of rapidly growing businesses and provide the flexibility to plug a shortfall. A loan involves taking a longer-term risk on the future performance of your business, but invoice factoring is being paid early for work that is already happening. Invoice factoring is still directly tied to the productivity of your business, so it grows with you and does not involve loan renegotiation.
Because the factor collects the money owed, it has the added advantage of reducing the administrative part of the process for your own company. Some UK Business use factoring simply to reduce admin costs on the credit control side of the business. This is due to the Invoice Factoring provided using their over credit collections departments to chase outstanding invoices.
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All Invoice Factoring costs to businesses differ, so usually a quick chat can ensure a better idea of costs once we get an idea of your business.
Knowing that a factor is involved sometimes prompts clients to pay in a more timely manner. The factor themselves will usually pay within 24 – 48 hours of accepting an invoice.
However, because the factor contacts the customer directly, this is also a potential risk. That said, it is usual to agree a protocol for contacting your clients with the factor beforehand.
- Sometimes factors can refuse an invoice, so clear planning is essential.
- The service is not free and there can be hidden charges.
- Ending a factoring agreement usually involves some kind of notice period.
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