Invoice Factoring
Discussion
Anyone use this?
We are expanding and to be honest, it's hurting our cashflow. This looks like it could help us quite a bit in the short to medium term if used properly.
The obvious pitfalls would be to become reliant on it. Anything else to consider?
I have a meeting set up with Hitachi on Monday.
For clarity, we are not a big company, but turnover has increased from an annual projected figure of £250k to £350/400k. The associated costs with that sudden jump are the problem.
We are expanding and to be honest, it's hurting our cashflow. This looks like it could help us quite a bit in the short to medium term if used properly.
The obvious pitfalls would be to become reliant on it. Anything else to consider?
I have a meeting set up with Hitachi on Monday.
For clarity, we are not a big company, but turnover has increased from an annual projected figure of £250k to £350/400k. The associated costs with that sudden jump are the problem.
A number of mt clients use Skipton Business Finance - they only operate in the SME market. I've not used them personally:
http://www.skiptonbusinessfinance.co.uk/
http://www.skiptonbusinessfinance.co.uk/
Used if for about 8 years and have used 2 different companies.
I trust them as my credit control depart - costs me a few quid over the year but if I didn't have them I'd have to employ some biscuit munching slob to do it.
The cost to me is about the same per year but the level of professionalism and accountability is way, way higher.
Back in the day with the biscuit muncher I'd have invoices stretching 240 days and beyond. Current company does a top to bottom ledger chase of all outstanidng accounts by phone monthy + I am in daily contact so queries are cc'd between me, Credit control and my client.
As for the comments above, It obviously depends on the business, the number and value of invoices and the type and number of clients you have.
I have never lost a client or contract because of using a factoring company. It works for us to the point I would seriously consider not taking on the credit controller again.
I trust them as my credit control depart - costs me a few quid over the year but if I didn't have them I'd have to employ some biscuit munching slob to do it.
The cost to me is about the same per year but the level of professionalism and accountability is way, way higher. Back in the day with the biscuit muncher I'd have invoices stretching 240 days and beyond. Current company does a top to bottom ledger chase of all outstanidng accounts by phone monthy + I am in daily contact so queries are cc'd between me, Credit control and my client.
As for the comments above, It obviously depends on the business, the number and value of invoices and the type and number of clients you have.
I have never lost a client or contract because of using a factoring company. It works for us to the point I would seriously consider not taking on the credit controller again.
My clients seem to respond to the gentle touch put forcefully by my wife (financial controller).
With modern social media connections it is easy to get a bad reputation and much harder to build a good one.
I suspect if you need a factoring company you need to review you client profile.
With modern social media connections it is easy to get a bad reputation and much harder to build a good one.
I suspect if you need a factoring company you need to review you client profile.
About 10 years ago I also had a rapidly expanding company and used a facility for 18 months or so. Had no issues with customers, yes it cost extra money but as soon as we had built a pot up we ditched the factoring And managed to carry on without it. Would use again under the circumstances. Personally we went with Lloyds bank
I think it very much depends upon the type of company you are and the type of factoring company you use.
We used it in my last company as we had a very agressive growth strategy, hiogh margins, often slow payment terms and mostly very large companies as customers. That last point meant that the invoices were generally considered very secure from a risk perspective, which I suspect helped keep the costs down.
We found it relatively inexpensive for what we were doing, and there were high gross margins on the products we were selling (as in our material cost of sale was relatively low, but our fixed costs were quite high). For that it worked quite well in smoothing out cash flow.
For my current business which is somewhat lower margin but higher sale price, I think I'd be very hesitant to use it. Quantity of orders is lower, so I could see in that kind of scenario there's more danger of things going pear shaped more quickly.
It should be said, though, that accountancy is not my favourite element of business by a long shot, so I just smiled and nodded for the most part whilst the FD did the hard work on it.
We used it in my last company as we had a very agressive growth strategy, hiogh margins, often slow payment terms and mostly very large companies as customers. That last point meant that the invoices were generally considered very secure from a risk perspective, which I suspect helped keep the costs down.
We found it relatively inexpensive for what we were doing, and there were high gross margins on the products we were selling (as in our material cost of sale was relatively low, but our fixed costs were quite high). For that it worked quite well in smoothing out cash flow.
For my current business which is somewhat lower margin but higher sale price, I think I'd be very hesitant to use it. Quantity of orders is lower, so I could see in that kind of scenario there's more danger of things going pear shaped more quickly.
It should be said, though, that accountancy is not my favourite element of business by a long shot, so I just smiled and nodded for the most part whilst the FD did the hard work on it.
Tallow said:
We used it in my last company as we had a very aggressive growth strategy, high margins, often slow payment terms and mostly very large companies as customers. That last point meant that the invoices were generally considered very secure from a risk perspective, which I suspect helped keep the costs down.
We found it relatively inexpensive for what we were doing, and there were high gross margins on the products we were selling (as in our material cost of sale was relatively low, but our fixed costs were quite high). For that it worked quite well in smoothing out cash flow.
Same here. 90 day from end of month terms for very large international customers made factoring a no-brainer for us. We only factor some invoices though.We found it relatively inexpensive for what we were doing, and there were high gross margins on the products we were selling (as in our material cost of sale was relatively low, but our fixed costs were quite high). For that it worked quite well in smoothing out cash flow.
I would rather loan the business some money in the form of a DL than use factoring.
Could you get an overdraft on your business account? We managed to negotiate one at 1% up front and 1.5% interest.
In terms of getting your invoices paid you defo need a good credit controller. In the past my MIL was our CC and we had invoices for £10k+ well over 180 days. Mental. They (ILs) were old school though, and more bothered about giving the impression that they were cash rich and in reality we were struggling to pay our suppliers as our customers were basically allowed to pay when they felt like it. But they looked good down the pub...
My wife took over about 10 years ago when they retired and now she is looking after things we have 1 customer on 60 days. Everyone else on 45 or 30. One of our worst customers for paying now sends a cheque weekly!!! She also moved 90% of the customers onto BACS rather than cheques. In addition there were 3 or 4 customers who just did not want to play ball so she terminated them. At the time I thought it was a bad idea but now looking back we were running round for these people for next to nothing and taking all the risk - they were just taking advantage of us.
Could you get an overdraft on your business account? We managed to negotiate one at 1% up front and 1.5% interest.
In terms of getting your invoices paid you defo need a good credit controller. In the past my MIL was our CC and we had invoices for £10k+ well over 180 days. Mental. They (ILs) were old school though, and more bothered about giving the impression that they were cash rich and in reality we were struggling to pay our suppliers as our customers were basically allowed to pay when they felt like it. But they looked good down the pub...
My wife took over about 10 years ago when they retired and now she is looking after things we have 1 customer on 60 days. Everyone else on 45 or 30. One of our worst customers for paying now sends a cheque weekly!!! She also moved 90% of the customers onto BACS rather than cheques. In addition there were 3 or 4 customers who just did not want to play ball so she terminated them. At the time I thought it was a bad idea but now looking back we were running round for these people for next to nothing and taking all the risk - they were just taking advantage of us.
Do you take payment via PayPal by any chance? If you have a regular flow of payment through a paypal account they open up flexible ways of borrowing which you can pay back as a percentage coming off of future payments or you can pay it back in chunks or a lump, whatever suits. We found it really helpful for cash flow while expanding.
How about something like this? - selective invoice finance rather than doing the whole lot.
https://www.marketinvoice.com/
https://www.marketinvoice.com/
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