In addition to the obvious advantage of accelerated cash flow, there are several other advantages to Invoice Discounting or Factoring.
Customer relations can be improved with the use of factoring or invoice discounting. With factoring the responsibility for administering and collection of your sales ledger rests with the factor, therefore a company no longer has to pressure its customers for payment on overdue accounts. When customers are aware that a factor is involved, customers may even pay their bills more promptly.
Since the factor may also be handling accounts for several other of their suppliers, customers will be careful not to jeopardise their credit rating, as non-payment to one supplier may immediately damage their rating with others. Factoring may even save a company money. Many firms are not able to duplicate their services offered by a factor on their own for the same cost.
Factors can also provide a company with other services such as letters of credit and import inventory financing. Some companies even use a factor for a division or subsidiary, rather than setting up a separate credit department. Finally, factors can be utilised to avoid major credit errors when building a market for a new product line.
With Invoice discounting you handle the collection of the ledger, confidentially. Nobody is aware that you are using the service. You can still avail yourself of the the services outlined above if you like.
Not sure how long on average your customers are taking to pay? Use our FREE interactive debt turn calculator. It will also let you forecast the savings! What effect would it have on your profitability if you suffered a bad debt? User our FREE bad debt interactive calculator.
How much working capital can I release from my current ledger?
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