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• 02 Jan

  Bringing Credit Control Back In House After Using Factoring

  An interesting question was recently raised on our research group regarding bringing credit control (credit management) back in-house after having used factoring.

  Bringing Credit Control In-House

  Please read our general guidance about leaving factoring.

  You may be making this change for a number of reasons, including:

  • Moving away from factoring to another form of funding.
  • Wanting to take back control of your customer relationships.
  • Moving away from outsourcing, towards an inhouse model.

  Whatever the reasons, the process has some issues to be considered to ensure that all runs smoothly. Failing to get the process right could lead to to a major cash flow problem if your customer payments slow down.

  It is vital that you speak to your factoring company and work with them towards your goal, you cannot just change the process without consulting them.

  Replacement Funding

  If you are using funding from your factoring facility that needs to be replaced with an alternative. This could be an invoice discounting style facility, where you still receive funding but you handle the debtor collections. Your existing provider may be able to provide this, however it could be an timely opportunity to have a look around the market and see if you can save some money by price checking your current supplier against their competitors.

  Alternatively, you may want to consider other funding options, such as a business loan. However, that type of finance will work on a reducing basis i.e. it is paid off over time, whereas invoice discounting revolves, and hence can grow as your turnover increases.

  Credit Control Process & Staff

  The most obvious issue will be the need to replace the outsourced credit control process with an in-house version. You will need someone, or a team to handle the work, and a robust process put in place. Often the cost of recruiting and retaining your own specialist staff can vastly outweigh the cost of the factoring service, so be careful when costing the transition.

  We have a free guide that sets out how to structure your own credit control process.

  Debtor Payments

  With factoring all debtor payments are normally received into an account, controlled by the factoring company. If you move away from factoring payments from debtors will either need to be redirected to your own bank account (be careful - liaise with your factor as banking payments whilst still in the factoring arrangement is considered fraudulent), or to a trust account in the name of your company, but controlled by the discounter, if you are migrating to invoice discounting.

  There can be delays caused by payments still going to the wrong place that can once again put a strain on your cash flow.

  If you are considering this process call Sean on 03330 113622, and he will talk your through the options when bringing your credit control back in-house.

  By Glenn Blackman