Invoice Finance Tips
These are some of the invoice finance-related tips we have published via Twitter:
- Factoring can be used in conjunction with trade finance to repay the cost of your imports and help with credit control
- Small invoice sizes can drive up the cost. Some discounters run "bulk" ledgers where it makes no difference to cost
- In addition to an overall ceiling some factoring companies have funding limits on each debtor these vary between factors
- Discount charge is a % but is normally a margin charged over the base rate which you need to add to calculate it
- The funding limit or payment ceiling is the maximum amount of funding, most factors won't restrict this unnecessarily
- Factoring tip: re-factoring charges are applied by some #factoring companies when invoices exceed a certain age. Not all factors charge them
- Invoice finance companies - the biggest single factor that inspires online trust = customer testimonials & recommendations
- Contra account = debtors that you also owe for supply many invoice finance companies won't fund them or hold retentions
- Restrictions that inhibit funding include a recourse period when funding is withdrawn so check the age of your invoices
- Funding restrictions besides initial payment %: prime debtor restriction, funding limits, payment ceiling & retentions
- Don't just compare initial payment percentages between #invoicefinance offers, consider other restrictions e.g. PDRs
- Service charges or administration charges may be subject to minimums so watch out when comparing invoice finance deals
- When comparing invoice finance offers don't just compare service charges, include discount charges and other charges
- Debt factoring is another term for factoring ie funding & credit control.
- Applying for factoring? get your ledger up to date this will reduce the factors perception of the workload and maybe price
- Bad debt protection (aka non-recourse) can have a first loss clause that differs between invoice finance companies
- Most invoice finance companies offer electronic invoice upload but the level of work for the client varies dramatically
- You can still qualify for confidential invoice discounting with poor financials provided your systems are good
- Not all bad debt protection is the same. You can get 100% coverage on invoices covered by credit limits
- The recourse period is the period after which a factoring company withdraws funds if an invoice is unpaid - the period can vary
- Confidential factoring the factoring company chases customers in your name using a phone number they answer as your business
- Invoice finance from an independent separates your funding from your bank lending
- If you want to move factoring companies some factors will help with any exit fees from your factor to get your business
- Invoice finance doesn't have to be long term it can be for single transactions, seasonal peaks or large orders
- Bad debt protection can be added to invoice finance facilities so you don't need to worry about customers not paying
- If you give customers credit terms e.g. 30 days invoice finance can release a lot of the money tied up in your invoices
- You can get funding against even small value invoices but not from all invoice finance companies example to follow
- If you want easily predictable fees and charges there are single-fee facilities available now from several factors
- Avoid time-consuming monthly reconciliations, some discounters have auto reconciliations & some run shadow ledgers
