Wednesday, 22 May 2013

5 Questions to Ask about Invoice Factoring Services

Invoice factoring services are selling accounts receivable at a discount to receive fast cash. These are effective when you cannot keep up with your sales growth. However, you need to ask yourself five questions to make the most of this financing solution.

1. How is my client paying?
Invoice factoring services are tailor made for you if you have customers with a good credit record. Even with a reliable payment history, they might not be paying when you need the cash.

2. Have my clients taken the order?
A factoring company pays if your business has ongoing transactions. Therefore, you need to complete those orders before approaching the company.

3. How frequently do my clients pay?
A period from one to three months is the standard that many factoring companies expect your clients to pay. Otherwise, they will find it difficult to factor your invoices.
4. How am I managing the receivables?
Accounts receivable financing will work only when there is a system in place to manage your receivables. The process should include steps like how you make priorities and communicate with your clients.

5. Do I have any financial concerns?
You need not have excellent credit for factoring, yet past issues like tax problem sand debt records could be a deal breaker.

A bank loan might not be a perfect solution when a cash flow shortage hits hard. Account receivable financing can come handy on those occasions.

No comments:

Post a Comment