By making a factoring arrangement, your cash flow is rapidly improved because your selection of professional invoice factoring companies will pay you after you have raised an invoice, as soon as work is completed and before your customer is ready to pay you. This removes the need to wait for companies to decide when to pay and improves your cash flow immediately.
What Is a Factoring Arrangement?
Invoice factoring companies form an agreement with your company to sell their accounts receivable, with the necessary discount, so that the bill can be paid to your company by the factoring company. The discount is the equivalent of your fee from the factoring company to advance your cash flow.
The amount of the fee may vary between invoice factoring companies and is based upon the credit history of your customers and not on your previous credit record.
The main advantage of organizing an agreement with a factoring company is the ability to be paid quickly without waiting for the customer to pay you one or two months later, and occasionally even later.
This advance on your expected cash flow may be a significant amount that allows you to continue in business. At the very least, it may allow you to claim discounts by paying your bills earlier or provide you with the opportunity to bring in new employees who will be able to boost and enhance your bottom line.
You do not have to worry about your customers being concerned that they will be paying your invoice to a factoring company. They will probably understand the situation and may have used factoring companies themselves in the past.
This is all standard business practice and saves you the time and money of chasing the invoice because you are desperate to improve your cash flow. This removes the need for you to cause aggravation with a company that you enjoy working with and may be a long-term source of business into the future.
