National Society

Factors or debt factoring companies, as they are also sometimes known, provide financial services to businesses based on the values of the invoices that it issues for its normal goods or services.  In essence, factors are third party handlers for these invoices; they advance funds to the business based on the invoice value and then pursue payment with the customer on their own behalf, when the invoice falls due.

Factoring companies provide a range of services, including the collection of the debts and the management of business ledgers, although the individual company can retain control over how the sales ledger is managed.  Factors also supply credit insurance and other useful business support services.

Choosing a Factor

There are independent factors, as well as financial institutions and banks that offer factoring services.  Investigate several possibilities before making a decision, as services and costs will vary from one company to another.  Always check out a company’s reputation and take up any references supplied.  Using a broker is another option, this may save money as the broker receives a commission and therefore makes no charge.

Although a company may decide invoice finance offers the best solution to improving its cashflow situation it may hesitate in trusting the goodwill of its clients to an outside party. The worry is that its customers might balk at this perceived drastic change and be concerned about their supplier’s perceived financial health. Customers might also decide they do not want to have to deal with a third part when billing disputes arise. Whatever the reason, the choice of invoice discounting can make a financially sensible decision no less favourable from a customer service perspective.

Invoice discounting, unlike invoice factoring, involves the lending institution advancing between 80 and 90 percent of the value of its client company’s sales invoices, while retaining its control over billing and collections. In this way, clients need not know a business has chosen to sell its debtors list and will not experience an off-putting change in service. Invoice discounting and factoring are especially helpful for new businesses that might not yet have a solid financial history against which to borrow. By selling the invoices to the factoring company and either allowing it to handle collections or keeping the billing and collections in-house, the company ensures a constant and consistent cashflow.

The first couple of years is the make or break period for many new businesses. As a result of start up costs and juggling the demands of suppliers that want to be paid now and customers that delay payments for as long as possible, start-ups often drown in debt. By utilising invoice discounting, a company can build solid customer relationships without sinking under the weight of delayed accounts receivables.

If you have a growing business, you will know how difficult life can become if your debtors do not pay their accounts on time. You will suddenly not have enough cash in hand to pay your suppliers, which could have a negative effect on your credit standing with them. In extreme cases your business might even have to cease trading, despite the fact that it has great products and a growing customer base.

A solution to this problem could well be to try invoice factoring. There are various benefits of using this method of raising finance when compared to traditional bank financing. In the first place you will have a decision much more quickly and the money will be in your bank account within a day or two of being approved.

The factoring company buys your outstanding debtors ledger and if you choose non-recourse factoring, they will also take over all debt collection duties. If you prefer not to have someone else chase your customers for money, choose recourse factoring, in which case you have to collect the outstanding money yourself and then pay it over to the factoring company.

The cost involved will depend on the level of involvement of the factoring company, but it will usually vary between 1.5% and 3.5%.

You should note that any accounts that have queries will have to be dealt with by you, since the factoring company does not know the specifics of the agreement between you and the customer.

Despite the few disadvantages, it might well be worth your while to try invoice factoring next time your business needs a cash injection quickly.

Invoice factoring can be a useful method of obtaining finance for a company, but it is not a step to be taken lightly. Several points should be considered first, for example, what is the main attraction of factoring for your business, is it to improve cashflow problems and overcome difficulty in obtaining loans or to reduce business costs by eliminating your credit control staff? Whatever the reason, the first step is to determine the expense of billing and collecting.  Secondly, determine what monies are being lost as a result of investments not made due to delays in accounts receivables being paid. With these two bits of information, the financial officer of a company is in a position to make an intelligent choice when shopping for a factoring company.

Before comparing prices, any adverse effects of going down the invoice factoring route have to be considered. To what extend does the business rely on maintaining close customer relations? Occasionally, the introduction of a third party into the supplier client relationship can cause waves. Customers may question whether your company is in financial trouble or whether they will continue to receive the same first-class service when billing questions arise. If this might be a problem, then choose a type of invoice factoring called discount invoicing. With discount invoicing, your company maintains control over billing and collections, but still receives a substantial percentage of the accounts receivables upfront.

Once you known what can be saved and what can be gained, the search to find the best rates can begin. Remember that, as important as cost is, the quality of the factoring company is also a prime consideration. By using discount invoicing as a means of “testing the water” a business can benefit from trying invoice factoring without any repercussions and perhaps later ease into permitting the lender to take over every aspect of credit control.

One of the problems facing a newly formed company is that lending institutions are particularly hesitant to make new business loans. New businesses are notorious for closing at almost the same rate as they begin trading; they often lose money in the first few years. Once a business is established, obtaining loans is less of a problem, but until then new start-ups generally have to rely exclusively on internal funding. However, an alternative to business loans, known as invoice factoring, makes obtaining new business loans unnecessary.

Invoice factoring, also referred to as invoice or debtor finance, involves a lender, the factor, paying a percentage of the value of a company’s sales invoices upfront and collecting the debt from the company’s clients. After receiving payment, the factor then reimburses the company with whatever monies are left after deducting the upfront payment and any interest and charges.

In this way, rather than repeatedly having to apply for new loans, the company receives monies to cover its operating costs in a predictable and continuous manner, with the lender using the invoices as a form of collateral. The company has a regular cashflow and saves money on the billing and collecting of accounts receivable, because the job is taken over by the factoring company. Friction between slow-paying clients is eliminated by allowing a third party to handle collections and the company is able to concentrate its efforts on building a strong customer base, rather than spending time on credit control.

Any business looking to return capital to their account without waiting for invoices to be paid in full should utilise invoice factoring. It is not uncommon for as much as 95% of a business’s cash to be tied up in unpaid invoices. Think how much you could grow your business during the meantime if you only had that money. This is what factoring offers you. Factoring is best for businesses that need a quick turnaround of invoices to prevent capital shortages.

Competitive Rates

Since many factoring companies exist there are quite competitive rates. When you try invoice factoring, you only pay a small percentage of each invoice to the factoring company. The rest of the invoice is paid to you within just a few days.

Plan Ahead

When you don’t have to wait for customers to pay you, you are able to better plan your company’s finances. The only downside is a smaller margin of profit by using the factoring company and incurring those costs. A factor also helps you determine the credit standing of your customers so you can plan whether you should do business with them in the future or not. In the long run, you reduce the number of bad customers and increase the overall customer quality to increase cash flow.

Stay Protected

Many factors offer protection against bad debts. Even if your customers don’t pay, you still receive the agreed-upon percentage of the invoice. With a small fee each month, with is usually a percentage of the turnover, you remain protected and can maintain a regular cash flow no matter when, or if, your customers pay.

When you try invoice factoring, you increase immediate cash flow and can protect yourself from losses should customers not pay. While it may not be right for every business, many businesses find the protection and invoice management services useful and beneficial.

Having a pet can be a very rewarding experience, but whether the owner is a dog person, a cat person or a reptile enthusiast, keeping a pet is a big responsibility. Pets can also be expensive and quite often people do not consider the fact that they not only need regular feeding, but also their health needs to be taken care of. Vets’ bills, depending on the problem at hand, can be enormous. For a pet that needs regular treatment due to illness or injury the costs can escalate to sometimes unmanageable proportions. This is where pet insurance comes to the rescue.

Taking out insurance on a pet means just a small monthly premium, but the policy will cover many of the medical expenses required to keep the animal fit and healthy. Each policy will be different and some companies may cover treatments others will not, so it is wise to shop around to ensure the correct insurance policy is purchased.

Opting for pet insurance means peace of mind for any pet owner, particularly when times are tight financially within the household. Having to pay for unexpected veterinary bills when a household budget is already stretched to the limit can cause massive problems for any family. The stress and worry about how to manage the cost of animal care is one of the main reasons people take out pet insurance.

There are many reliable insurance companies available, but for anyone unsure of which to use, discussing the issue with their vet is a good idea. They may be able to recommend an insurance company they know to be reliable.

You have numerous options when it comes to factoring companies. In order to find the best possible factor for your business needs, there are several questions you need to ask about the factor. Considering this is a long-term relationship, choosing the right one the first time is important. You can access a full list of factors from the Asset Based Finance Association, or ABFA.  A good recommendation is what to look for.

Interaction With Customers

Check whether the factor company communicates with customers or not. Be sure you understand their procedures so you do not lose customers due to poor treatment. In addition, ask how quickly debts are typically collected. Slow collection rates could result in extra fees or even bad debts.

Interaction With Your Business

Ask how the factor interacts with your business. Factoring companies that stay in close contact with you are best. You always know where you stand and how debts are being collected. However, the two of you should agree on policies and procedures. Ensure you ask about agreement termination terms. Some require as much as a year’s notice and early termination fees can be steep.

Home insurance or homeowner’s insurance as it is sometimes also known, is a type of personal insurance protection that covers various incidents that can happen in and around the home.  For example, home insurance typically covers the loss of any items in the house, whether this results from fire, theft or storm damage, as well as covering any damage to the property.  In addition, homeowners can pay for policies that cover the loss of the use of the property, which would mean they have to live elsewhere for a period of time, as well as the loss of the homeowner’s personal effects when they are located outside the home.

In addition to the normal cover, customers are able to purchase additional items if they feel they need them.  For example, anyone that lives in an area prone to flooding might choose to opt for an extra policy that would cover them if anything happened to their property as a result of water damage.  The policy premium would, of course, be higher when opting for such extras and therefore might not be the best choice if looking for cheap home insurance.

Many people are feeling the pinch as their household budget tightens. When this happens non-essential items tend to be dropped in favour of more affordable or cheaper options. A large number of people may even consider cancelling or not renewing insurance policies that they deem unnecessary, and life insurance may fall into that category. However, cancelling a life insurance policy is not to be recommended.

Life insurance is there so that if anything were to happen to the policyholder their loved ones would be taken care of financially. Losing a loved one cannot be made easier by any amount of financial compensation, but when the household income is reduced, or, if the person who passes away was the sole earner in the house and the income stopped completely, it would cause additional strain where there is already enough heartbreak.

A life insurance policy, even just a small one, can help to cover things not considered in everyday budgeting, such as funeral expenses and solicitor’s costs, which can often run to thousands of pounds, and mortgage repayments if there is no payment protection insurance policy in place. Leaving loved ones without the financial worry a death can bring could cost just a few pounds each month.

Some people may think they are too young to worry about such an eventuality as death, but nothing is definite. The sudden passing of a loved one is already hard enough to cope with without additional financial worries. A life insurance policy is the best way to avoid such a burden.