5 Keys to a Successful Factoring Relationship

If you’ve ever issued an invoice and had to resubmit it for missing information, dreaded the follow up call asking “when will I receive payment”, extended credit to a customer you shouldn’t have, watched an opportunity come and go while you were waiting to get paid, or spent an afternoon following up on outstanding invoices… you should consider working with a Receivable Management & Financing Company, traditionally referred to as Factoring.  

Traditional factoring has evolved and, to the savvy business owner, serves as a sophisticated financial tool helping to improve efficiency, reduce risk, and balance cash flow.  

1.  Credit Exposure – The Factor needs to understand your customer’s credit worthiness before approving any advances.  The right factoring company will share this information, helping clients assess risk associated with prospective customers and assisting in extending credit or establishing payment terms.  This ultimately helps reduce or mitigate the risk of bad debt write offs for it’s client. 

2.  Follow Up – The Factor will need to verify that your invoices are valid, due and payable. The right factoring company handles this as a service to you, the Client, by interacting with your customer professionally and respectfully.  “This is Carrie, calling on behalf of EPS.  Did you receive the invoice? Are you missing any supporting information or have any questions?”  If our staff can’t answer a question or provide missing information, we email our client immediately to follow up and provide the required information directly.  This reduces any potential delay in processing the invoice by our Client’s customers.  

3.  Squeaky Wheel – The Factor sends statements and places calls on anything past due.  The right factoring company handles this professionally and respectfully,  identifying any reason for slow pays or discounts and further helping the client reduce DSO (days sales outstanding).

4.  Reporting – The Factor tracks all invoices, payments, fees, etc.  This information can be used to help balance cash flow and minimize fees.  

5.  Liquidity – The Factor advances against current invoices.  Fees apply from the advance date on the invoice value.  Advance against current invoices when you need additional liquidity and minimize the headache associated with balancing cash.  The right factor offers no minimum and no long term contracts – providing service and access to cash.  The perfect combination.