[Fox]

What do you guys think on this subject?

Do you think it would help your cash flow or not? - I have pretty strong opinions on this subject but would like to hear yours and take them into condsideration before I get on my high horse!

Has anyone actually looked into or considered this type of credit control?

Fox

[Dusty]

Fox

There are different levels of Invoice Factoring. The basic level is just a loan to create cash flow until invoice is paid, which is great if you are heavily staffed undertaking a big contract for a PLC that wants to pay up to between 1-3 months in arrears. This lower level invoice factoring is repaid by you to the factoring house when you cash your payment cheque, but only offered to companies with solid balance sheets themselves.

The higher level costs more, but the factoring house will collect from the customer which may be advisable if you are thinking of contracting for Jarvis or another company with a bad credit record.

Take a look at "Business Moneyfacts" magazine which is on sale in WHsmiths for a good list of factor houses and the facilities and services they offer.


This lot look good

http://www.venture-finance.co.uk/what_we_do/factoring.html

[Fox]

Hi I did look into factoring and was surprised at how much things have changed - for instance they do not neccessarliy chase your clients now they will let you continue with the client on credit control issues and then obviously you place to them any payments that you have claimed invoices against with the factoring company (who will obviously want to have a debenture).

This would still give you control as to the fact that the client would not know you are factoring.  However because of this industry invoices are submitted at the beginning of the month for payment upon completion of works.  Granted we are not always paid that promply but a factoring company would not let you submit your invoice until the works were actually carried out giving the client in effect 60 days not 30.  

The point to this is that if you submit your invoice at the beginning of a period and do get paid within a couple of weeks of completion what would you be paying the factoring company for?  If you used them you couldn't invoice until the completion of works and the factoring would then take up to ten days to release your money plus you still do your credit control!

Just don't see the sense in it myself, however someone may come up with a good reason to use this method!

Fox

[alljays.cleaning]

I have used a factoring company for several years when I was with Chem-Dry ( carpet cleaning franchise) we had contracts with insurance companies , we invoiced the master franchise who then invoiced the insurance company, payment took forever and Factoring seemed good at the time
We filled in a schedule and sent it off to the factoring company who payed us 60% of the invoice amount, the remainder less the factors discount was payed upon the invoice being settled with the factoring comapny.
It was all well and good but the factoring company never chased invoice payments on our behalf and why would they , they earnt money on the time it took to settle the debt so the longer it was outstanding the more they made. If a debt went over 90 days the factor took back the 60% thay they had forwarded on to you.
Thankfully we are no longer in that business, I would never go back to factoring
Just make sure that you set out your terms to your customer in your terms and conditions and stick to them.
Companies have far more respect for you if you show them you are running a professional business and wont be messed around, they wouldnt think twice about sending you letters and charging interest if you pay late

Stick in guys dont go down the factors route they win every time  

[Fox]

Hi alljays

Must say I totally agree with you.  It's all about credit control.  I know some people hate picking up the phone to chase for money but believe me Companies are very used to this.

After a few phone calls to a clients accounts department they know that you are hot on getting payments and will then start to pay quickly and regularly without the phone calls.

Profit is this business is not enormous as it is so why give a % of it to someone else?

Fox