8 Must watch TED talks for small business owners
Feeling a drop in motivation? TED talks never fail to fire us up. Here are some of our favourites......Read More
Some small businesses see factoring as a more secure solution than chasing late payments from unreliable customers, but it’s a controversial area that could cause SMEs more headaches than benefits.
Invoice factoring is a form of business funding. A third-party company will buy invoices for around 85% of the cost upfront, manage the correspondence and collection of the funds from the customer, and pay the remaining 15% back to the business at the end of the process. For the service, businesses will pay a fee and interest.
In theory, factoring grants peace of mind that the majority of the costs (if not all of the costs) have been recouped, handing back the power and room for growth. But, SMEs need to be mindful of the terms and conditions that accompany factoring, and that no-strings attached cash isn’t likely if the debt is truly a bad one. Let’s take a closer look at recognisable situations for SMEs, and the pros and cons of bringing in an invoice factoring company.
While factoring may light a fire under your customer and encourage them to give more urgent attention to outstanding invoices, it’s a risky tactic from a relationship management perspective. It’s important you know exactly what steps you’ve taken to get the invoice paid
The customer should be aware of how long they have to pay after an invoice has been delivered. Has this been made clear to them?
Remember to contact the customer as soon as payment is late, even if it’s just one day overdue. If you’ve frequently and comprehensively been in touch, question;
It’s possible your correspondence may not be getting to the right person, or that someone has left at the other end, so copy in your contact or their manager and enquire about the status.
If the customer remains evasive at all levels of management, contacting an invoice factoring company will feel like a simple solution. But, if you’d like to salvage the customer relationship, professional etiquette demands that you advise them that a third-party will be in touch. If it has been a simple miscommunication, shock tactics won’t make for friendly chit chat at the next meeting.
The factoring company’s terms and conditions will reveal a lot about the company you sign-up with. Not only should they should share your values and treat you and your customers with respect, but your agreement should be transparent. Ask the factoring company about their policies on:
If the customer is beyond the point of return (they can’t and won’t pay), non-recourse factoring means that the third-party collector will absorb the costs and you won’t owe anything further. If you’re signed up for recourse factoring, you are bound to buy back any bad debt.
Ensure that their terms are transparent as different companies will require unique payment structures to include; flat fees, a percentage of the total cost, additional charges such as money transfer fees, or even expenses.
For example, if a factoring company require a year-long contract, but you only have one difficult customer, weigh up the value of the outstanding debt and factoring expense. If you have a recourse factoring agreement, a short contract can put immense pressure on your business if you have numerous outstanding debts which need to be repaid all in one go.
Arron Newton- Fantastic customer …
"Arron Newton- Fantastic customer service Arron Newton has been First Class with me when it came to helping us to get a great deal on our business electricity and gas. His advice has been invaluable and his contact details are now firmly saved on our business database. I would thoroughly recommend both Switchmybusiness.com and Arron , many Thanks Dave Jackson, The Catering Butcher -Stoke"This review was posted by David Jackson on the 17th of August 2017
I spoke with Bhavni today who was very …
"I spoke with Bhavni today who was very helpful and friendly. The switch over from British Gas to Dual was so simple. I was given a template to send to British Gas to terminate the contract by email, all I had to do was fill in my account number. There really was no hassle! Thanks"This review was posted by Will Halton on the 16th of August 2017
Very good service
"Very good service. Explanations from Arron Newton were clear and thorough, making the process easy and straightforward. I would certainly recommend Arron and this company. Excellent."This review was posted by Dulik on the 16th of August 2017
Mark Weeks - Excellent Service
"Mark Weeks has helped me with selecting the most Competitive Electricity supplier for our Business needs. I would thoroughly recommend both Switchmybusiness.com and Mark Weeks, many Thanks"This review was posted by Jason Davenport on the 16th of August 2017
All good as far as I can tell
"All good as far as I can tell. 24 hours from first enquiry to signed contract and a good deal as well. Mark Weeks made it all simple and was friendly and helpful. He even got a decent rate for my mum!"This review was posted by Chris Gutsell on the 16th of August 2017