April 2007 - Small Business News

Invoice Finance Factoring from Taxi Company to IT Business

Turn invoices into cash in 24 hours – Find out more here.


Invoice discounting is a quick and cheap form of finance that helps your cash flow, but many businesses still have questions about how it works. To help you get a good deal from your factoring, here are the answers to your top questions:


What Types of Business Can Use Factoring and Invoice Discounting?

A huge number of businesses can benefit from invoice finance services, all the way from Taxi companies to IT businesses. However, most retail businesses are not suitable as no credit terms are generally offered.


How quickly will payments from my customers be cleared funds in my account?

Funds from customer collections are typically available on the day following their receipt - no need to wait for cheques to clear!


I've heard of some invoice finance companies only chasing the big invoices for payment, leaving clients to pay the charges on overdue invoices. Is this common?

Be careful not to get tied into a contract that allows this to happen. However, a large proportion of invoice finance companies chase all the overdue invoices regardless of value.


Do I have to factor all of my customers?

Most companies usually prefer that all customers are factored, there are some invoice finance providers that will provide your business with a facility that allows you to factor selected customers, therefore saving you money by not factoring customers that pay on time.


How are the charges structured?

Charges are generally broken down into 2 parts. The 'service charge' which is based on the amount of administration involved in your account and the 'discount charge' which is the cost of the money you borrow.


How much are the service and discount charges?

The service charge is typically between 0.75% and 3% and the discount charge is usually between 2% and 3% above base rate.


How much work will be involved in sending you my invoices?

Usually a minimal amount - you can simply send in an invoice schedule with complete details of the invoices. Alternatively many invoice finance companies provide the facility to upload invoices directly over the internet


When do you start charging me for the funds I draw?

Clients are charged only from the time when the payment to you is made. You only pay for the money you draw, not the total amount of money you have available.


I've heard of many companies being tied in to an agreement for years. Is this a fact?

It is true that some contracts are long term this can be the case with the larger invoice finance companies and can sometimes be difficult to terminate. Having said this, many of the independents offer shorter contracts that run for just 12 months (terminable by 3 months notice thereafter).


Do I have to deal with a call centre? How well will the person on the end of the phone know my account?

Client service is one of the most important factors to consider when choosing an invoice finance company, it is important not to sacrifice service for price. Many larger invoice finance companies will have a high client to account manager ratio which makes it difficult for the account manager to entirely understand your business. A ratio of more than one account manager to 25 clients generally means that the account manager will not fully understand your business.

The right invoice finance company for your business will have account managers that manage fewer clients and will therefore know your business inside out and understand the issues your business faces.


How long does it take to set up an invoice finance facility?

This will vary considerably with the company that you are working with. The time to set up a facility can range from anywhere from a matter of days with the smaller less bureaucratic providers, up to weeks with the larger providers.

Find out whether our Factoring and Invoice Discounting services could help your business cashflow.