How can I try factoring without giving clients a bad impression?

I’m considering an invoice finance facility to fund the growth of my business. I like the idea of factoring to save costs on credit control and reduce the direct risk of bad debt to the business. To what extent can I control the process and make sure goodwill and relationships aren’t sabotaged, and how do I tell my clients?

A. David Richards of IGF writes:

There are savings to be made when you outsource your credit control to a specialist. Not only does a factor release vital cash flow in to your business, allowing you to pay suppliers sooner, they also specialise in getting your invoices paid efficiently, which can mitigate potential bad debts and reduce finance costs.

Choose the right factor and you can tailor this collection facility so that all your clients are chased regularly and professionally. It’s certainly not in the factor’s interests to cause you to lose sales, due to their procedures, but it’s wise to discuss these in detail with them. The right factor will try and build relationships with your clients for the benefit of all parties.

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Most factors have automated systems, which has an impact on their chasing processes. Ask what this could be before you sign up – it’s vital that your collections operate as you expect. You could ask to meet with your proposed credit controller. You’ll soon find out if they have the capacity to chase all of your clients properly for you.

And remember all factors should write advising your clients of their involvement, with a covering letter from you, as a courtesy.


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