What is Factoring and How Can It Improve Your Business?

Factoring can be defined as a process where a business sells its invoices to a factoring company and in return, it receives instant payment as a cash advance. Just for a small fee, the factoring company makes the debt follow-up and handles all the payment issues which are not yet settled, getting rid of all the difficulties associated with the administration of the invoice.

Factoring is very crucial to any small business as it can enhance the cash flow and promote the growth of the company as it ensures there is consistent flow of income and also guarantees that there are no monetary assets held up in invoices thereby providing quick access to funds which are meant for the business though they are yet to be paid by the debtors. Factoring is ideal for a start-up business and small companies.

How factoring can improve your business

Invoice factoring ensures the businesses have quick access to cash flow, conveniently and is an excellent option to traditional means of financing. Factoring can improve your business in a variety of ways.

Improves cash flow and generates working capital quickly without incurring debts

Since it isn’t a loan, account receivable finance can aid you in accessing the funds you require quickly, with minimal credit requirements. This makes it possible to secure working capital without damaging your credit, without accruing debt or negatively affecting your credit rating.
Securing a loan from other financial institutions such as banks will impair your credit score which can make it difficult for you to secure loans from any other institution.

Factoring can better your credit

As a result of increased cash flow you have realized through factoring, you can better your credit score as well as the credit ranking.

Since you can factor your receivables and have huge amounts of money quickly, you are well placed to settle the debts from other companies which may have extended you credit on time. This enables you to strengthen your relationship with your other creditors.

Paying your debts or bills on time is one of the ways of improving your credit score and not exploiting all the available credit. If you can follow these two things consistently then you will boost your credit score and this will help to qualify for huge amounts.

Factoring enhances your credibility

When you decide to partner with an invoice factoring company, paying bills on a timely manner cannot only improve your credit score but also enhance your credibility. Settling your bills on time helps to strengthen your relationship with the companies you acquire goods and services that your business requires. Contractors and vendors tend to build trust with businesses that settle their bills on time and this may lead to an extension of their credit. 

What are the Benefits of Factoring and How to Apply for it?

Factoring allows companies to obtain the repayment of their receivables without waiting for the payment periods to lapse. How do the methods of financing and debt collection actually work? What are the benefits for the company?

Factoring is aimed at all companies, although SMEs use this technique for generally smaller amounts than large groups. This market allows a company to receive an advance payment of an invoice by assigning it to a financial institution named “factor”. From an accounting point of view, this method is therefore for the company to take invoices receivables from its balance sheet to turn them into cash.

This method of financing can take many forms. Classical factoring involves the company giving up its invoices to the factor in return for immediate financing. It is particularly suitable for small structures. This financing technique, therefore, has several advantages over the discount that is not available to start-up companies, but also in relation to bank overdraft or securitization.

There are other less known forms. Among them is unmanaged notified factoring, which is more relevant to companies with a significant turnover. In this case, the structure transfers the notified receivables to the financial institution but is responsible for internally relaunching and collecting the customer invoices. The advantages for the company are numerous: the ability to control the customer relationship from A to Z, benefit from a cash advance or maintain certain transparency with customers.

Then, confidential factoring allows a company to maintain the management of the receivables while the regulations are financed by the factor. However, in this situation, customers are unaware of the existence of a contract between the company and the factor. In the case of reverse factoring, the company mandates the factor to pay its suppliers in its place which allows it to benefit from a commercial discount and pay it at the normal expiry date. Finally, factoring import-export concerns companies that develop internationally with a similar operation to conventional factoring. This last technique allows the company to outsource the management of the international customer, to consolidate and secure its orders.

HOW DOES FACTORING WORK?

The factoring contract is based on a tripartite relationship between the supplier, the factor and the customers. More concretely, it works as follows: the company that subscribes to the factoring contract sells products or services to its customer and then sells the invoice to the factor who becomes the owner. The latter makes a cash advance to the company and finances it in a timely manner. The customer of the company at the origin of the factoring contract must pay his invoice directly to the factor.

The factor takes care of the recovery of the invoices. In the case of unpaid bills and depending on the nature of the contract, the latter may assume the losses or claim the amounts due to the company. The credit institution can also offer a credit insurance contract to guarantee payments. By
subscribing to credit insurance, the company secures its receivables, guarantees its receipts and can obtain financial information on its partners.

WHY CHOOSE FACTORING?

Factoring has several advantages for the company. It is first and foremost a financing tool that enables it to improve the management of its operating cycle by ensuring the rapid settlement of its receivables. This helps to increase the company’s cash flow and reduce the need for working capital. Indeed, cash is a key element since it is used to pay salaries and suppliers. Thanks to this operation, the company does not need to resort to the bank loan.

Then, this technique allows the structures to lighten their administrative burden because it is the factor that ensures the functions of monitoring and recovery of invoices. By delegating these tasks, the company reduces its financial costs and saves valuable time.

Another advantage related to the use of factoring deserves to be emphasized: the elimination of the risk of unpaid bills. The factor can offer its client credit insurance that guarantees up to 100% of the
purchased receivables. The factoring company Credit Agricol leasing Factoring offers, for example, a complete solution to companies to optimize the management of their receivables and allow them to benefit from the financing of the invoices transferred, the management of settlements and the recovery of receivables as well as credit insurance to guard against the insolvency of their clients.

Factoring, however, has certain limitations to be known among which include the lack of flexibility of certain factors and the cost of this service. Thus, the establishment of such a contract requires to study in advance the additional costs that it generates for the company. It may be wise to compare offers from several companies to get the most out of this technical product.

Saving Business Thru Invoice Debtor Finance

Invoice debtor finance is a form of financing through which a business can obtain fund to run its operations against an invoice whose payment has not yet fallen due. It is a common form of financing among small and middle-sized business startups. It is one of the most preferred forms of financing as it is relatively easy to obtain money against these financial instruments.

It is common in those business entities that extend 30 or 60-day payment terms to their debtors after supplying goods but cannot wait until term lapses. It is common for those businesses that do not have steady cashflows or business reserves to cater for the period that you will have to wait. Since there are those financial obligations that the business has to meet between supplying the goods or products and receiving the payment, as an owner, you will have to find ways to meet these obligations, hence invoice debtor finance.


Can it save the business?

Invoice debtor financing can act as a lifesaver for your business when you hard-pressed for cash. With the 30 or 60-day delay period, most areas fo the business can suffer especially when you do not have any other source of income. If your business has a tight cash flow, you might not be able to bid for more jobs as you won’t have the money to service the contracts. This may lead to delayed contracts which will adversely affect your relationship with your business partners which will greatly impair your chances of future contracts.


If you are however able to free some money from the already completed projects, you will be able to bid for more work and deliver in time. With time, you will be liquid enough that you will not need to take the debtor invoice finance to facilitate your contracts. The beauty about these financing is that the risk of losing money is quite low since most of the debtors will pay once the period lapses. This means that you can accrue some obligations to be settled once you receive your pay.


From these illustrations it is clear that invoice debtor finance can save your business is well utilized. The most important thing is to ensure that you take it with the organization with the most favorable terms. Again, when choosing the organizations to supply to, ensure to get the ones with the least possibility of default as this will avoiding creating unnecessary risk to you and your financier.

Common Causes of Cashflow Problems


Proper cash flow is the goal of all entrepreneurs. This is the key to growth and a good continuation of business cash flow is the flow of working capital finance and expenses within the enterprise… Cash flow provides the fuel you need to pay for your small business. Cash flow problems can lead to a disrupted business structure, an important indicator of declining business.

Here are some of the common causes of cash flow problems:

You have a lot of debtors


Many businesses today offer their customers credit so that their customers can offer products and services immediately even if they do not have the cash available to them. Credit sales have a direct impact on cash flow, especially when customers cannot pay in the agreed time. The loss of time to pay by customers, especially when they are forced to pay a large sum, makes you get little money.

You have too many creditors


Having too many creditors can mean that your business has a large amount of debt to repay. This is especially catastrophic for cash flow when your business is ineffective, you have very limited cash reserves, and your creditors already require payment. Late payments may increase rapidly, making it more difficult to pay the outstanding amounts. Delay in payments can also affect your relationship with creditors and may lead to other problems, such as lower credit terms and premium rates.

Over-financing your business

Borrowing large amounts of money for your business can lead to additional charges, such as interest, and may require a shorter repayment plan. If you are not afraid of raising your debt, you can control your company. The more money you earn, the more difficult your borrowing terms will be, usually at a higher interest rate. Loans often delay the future crisis of cash flows, which may be worse than the crisis they are currently facing.

Failure to Leverage Factoring or Inventory Financing

Failure to use this financing solution when producing a product or service for a customer can result in a short-term cash flow problem. Think about using factoring to request a customer or inventory to buy the stock needed to create a product or service to help the company’s cash flow problem in the short term.

Excessive investment

Excessive investments, such as excessive trading volume, can cause negative cash flows. Businesses with sufficient resources may be tempted to purchase non-priority assets. This can, of course, lead to business failures, because existing funds, which should be available to fund day-to-day operations and any unforeseen expenses, are related to the asset purchased. Alternatively, assets such as cars and buildings can be rented to provide more funds.

Effective planning of Working capital finance is g of great importance to the business to avoid other problems. To solve the cash flow problems your business and face, you can also use the services of a business restructuring expert to help you plan and manage your money efficiently.

How to Improve Your Business Cashflow

Cash flow can make or break a business, but many small business owners do not do everything in their power to maximize it, and the result is loss of opportunity and stress for the company and the owner. On the other hand, there are some simple steps that can be taken to drastically improve business cash flow, which will also improve business management, i.e. use globalization and how it can be used effectively to help the corporate cash flow. Here are some tips to improve your business cash flow:

Develop good terms and conditions

Having good conditions is not only a good business practice for large businesses. It is a very good practice for small business owners to make sure that their clients know when (and how) they expect to pay. Be sure to include items related to late payment and interest, and that debt collection costs will be transferred to the customer. I had many customers who thought they could transfer the fees to the debt collection agency only to see that they had to absorb these costs themselves because they did not recognize their customers.

Perform credit checks on potential customers or customers who do not pay in cash

Many small businesses deal with any business they can acquire and make credit checks only when problems arise. It is often too late to check for problems. It may be better for your company in the long term to reject the customer immediately if he or she has a bad credit record, free payment or fixed arrears. Fee payers are often troublesome customers. These are usually backward, and it is usually impossible to satisfy and find any reason or justification for choosing errors in the company, and draining resources as they do.

Factoring finance

If you are a small company that is just starting, it is very important that payments for sales are made at a regular rate. There are cases when payments are so heavily supported that the company is very close to bankruptcy. Cash flows from the company occur at a normal rate because the services provided to produce goods cannot be stopped. So outgoing money and no money cannot lead to serious problems. In cases like these, there is another real option that companies can use. This option is called Factoring Finance. Factoring companies usually buy pending invoices from these companies at a reduced price and charge the full fee from customers at a later date. It helps both the company and companies. From the company’s point of view there is no need to sell the product, just buy an invoice at a lower price and get the full amount. The difference leads to profit.


Forecast your business’s cash flow

Many businesses spend a lot of time planning, budgeting, analyzing sales, overhead, profit and loss, and balance sheets, but they can forget cash flow. Get a good accountant. At a minimum, make a monthly plan and if it seems you can be a little tight, set up weekly or even daily forecasts. Develop a business plan for your money – if you look at how you can pass some payments, or talk to a factoring company to see how they can help.

Tips on how to avoid unpaid invoices

Collecting payments for the invoices created for customers must be easy, routine and simplified. r – recession, competition, high taxes, tense margins, volatile market; all these factors have made it extremely difficult to stay in the market even with large departments, leaving the same companies coming. To make matters worse, companies often struggle with the financial crisis because of late payments. With financial factoring and receivables, factoring companies that deal with a cash crunch due to late payments or unpaid bills can breathe a sigh of relief because they can generate badly needed cash flows without having to worry about collecting bills.

Financial Factoring

Financial factoring is the practice of selling unpaid invoices to an outside agency at a reduced rate for immediate payment of a certain amount. This practice works in favor of both sellers and buyers. The seller is able to generate immediate funds; after the download, the factoring company ends up earning. After finalizing the transaction, the debtors are notified of the payment made to the Factoring Company. This saves the seller from hassles downloading unpaid invoices.

Receivables Factoring

If your business deals with unpaid invoices, the factoring of receivables can be the best solution to this problem. With receivables, you sell receivables or bills to generate quick cash. Dealing with receivables is a common practice used by companies around the world to manage cash flow for centuries.

Invoice Factoring

Smooth cash flow is a prerequisite for good work. Companies have resorted to different types of financing to ensure that some alternative and non-traditional financing instruments have now emerged. Invoice Factoring is a process where unpaid invoices are sold to a third party or factoring institution so that the business receives funding for receivables and unpaid invoices. This tool helps to release working capital for better cash flows and the operation and expansion of the smooth business. The factoring company then waits for payment from customers.

Use debt collection lawyer assistance

It does not matter if you know the customer personally or if you have good relationships with him. In each position, you have the right to raise funds that you own. Before you use the help of the debt collection lawyer, you must do everything to collect it yourself. If you notice that things are out of control, you should take legal action. The first thing you need to do is keep calm. You have provided the customer with services and products, obviously, you are frustrated, but you should not lose your temper and calm down. Sometimes you can successfully raise money if you are talking politely to a client who owes you money.

HOW TO GET INSTANT CASH FLOW FOR YOUR BUSINESS

Growth is one of the key objectives every business owner will have. Various factors will determine how fast your business grows, but one of the main ones is the cash flow. To pay your employees, suppliers, and cover other business expenses, you will need to have a good cash flow. However, maintaining good cash flow is not a simple thing, and you will need excellent plans. If you are trying to grow your business, you will find yourself with no cash flow most of the times, and you will need to look for a way to get instant cash flow. So how do you get immediate cash for your business?

Get cash flow finance

Cash flow finance is helpful when your customers take much time to pay after you have delivered the goods. Some customers take up to 30 days before they pay for the invoice, and this can really inconvenience you. Cash flow finance is a type of financing where you take a copy of the invoice to your financier who will make the cash available for you before the customer pays. Benefits of cash flow finance include: Up to 90% financing of the total invoices, cover the gap of slow payment, avoid interruptions, and grow your business with ease. 

Selling your assets

Another great way of getting an instant cash flow is selling your idle assets. You can sell any unused equipment, or rent your free space to another company. By selling your assets, you will get an interest free cash that you can use to grow your business. 

Quick bank loans

If you have a good credit history, you can consider asking your banker to give you a quick loan that you will pay within a few days. When intending to invest in a long term project such as buying a long term asset, you can ask for a long term loan so that you don’t set your business to a cash crunch. Some banks will even process your loan within 24 hours. 

Selling your inventories

Do you have old stock that is not moving? Then this is a good chance to get some cash flow. You can liquidate any old inventory that is not moving and get some instant cash. You can even do this at a loss. 

Conclusion

Ensuring your business has good cash flow is very important as it will determine your growth rate. Use the above tips and get instant cash flow for your business.

Differences Between Factoring and Invoice Discounting

Most people assume that all business financing services are similar. Therefore, they cannot seem to decide on the difference between invoice discounting and factoring. with factoring, the supplier plays the role of sales management and credit checks, as well as prosecuting clients so they can settle their invoices in the company. When we talk about someone as a resource, we mean a financial company you call for financial services. The other important difference between invoicing and factoring is secrecy. If you use factoring services, customers will have to settle their invoices with the factoring company rather than your company

Invoice Factoring 

Factoring is a financing method that allows collecting financing based on the value of overdue invoices. Instead of sending bills, and then wait a month or more until the funds arrive, you can almost instantly convert them into cash. Many companies that are just beginning to realize that factoring provides a more flexible source of working capital than overdrafts or loans.

Choosing an account means that your cash flow finance company sells invoice financial rights to a factoring company. The transaction is organized as a sale, and the factoring company will pay the invoice amount in two installments. The first payment is known as an advance payment and is forwarded to your company after the sale of the invoice, which can be up to 90% of the invoice. The remaining part is received from 10% to 20%, discount when the customer settles the invoice.

When applying for a commercial loan, you usually have to wait a moment to find out if the application is effective or not. Factoring is easier and faster because the waiting period is much shorter. Because factoring companies generally buy invoices from a company, 


Invoice discounting

Works in the same way factoring work, freeing cash from invoices. The difference is that the lender does not offer credit management services to facilitate the collection of overdue bills. The service releases the invoice value, which can reach 90%, and you can control the loan management. Then you can reach the remaining 10% when customers pay the bill.


Cash is the source of maintenance for every company, and if you owe it to you, but you do not have it, it can cause a lot of frustration and potential headaches. An invoice discount allows you to control your debit account because you are responsible for managing your loan, which means that your company is responsible for collecting the payments due to customers.

The advantage of using invoice discounting is that it does not affect the relationship between you and your clients. There is no reason why they should be aware of the contract, especially if you manage a special account. This ensures that you can continue to provide the same loan terms that you have previously agreed with clients without affecting the cash flow finance company

Invoicing Made Easy

Often, in the day-to-day business of a business dealing with the number of daily transactions, it is necessary to have a remote invoice immediately and, therefore, inaccessible at the time, which poses productivity problems. and concerns that may directly or indirectly affect the overall performance of a company. To overcome this problem, the concept of electronic invoicing is catching up. Electronic invoicing simply refers to importing a virtual invoice saved in PDF format or any other compatible document directly into the billing software, so that it can be presented as a useful reference when necessary.

The main advantage of this type of system is the ease of access and convenience it offers by offering its customers a wide range of payment types. Thanks to electronic invoicing, customers who are quite rare at the moment do not only have the mail at their convenience but they can also monitor their banking activity digitally. By using dedicated billing software, you can also automatically configure the system to send reminders to customers about the due date or any update/reminder, so that customers get the most out of it. Benefits helping them avoid late payments.

With the use of invoicing software and the electronic invoicing , there is no longer response time for sending invoices to the courier for delivery, pending payments by mail or queued at the bank. You can send electronic invoices securely to your customer’s email identification with one click or electronically transfer the payment to your account. E-invoicing allows you to process multiple invoices in a fraction of the time required to complete an invoice, which, in addition to saving you time, means that your donation to nature, which is green, reduces costs. We are roofing experts. Whether you’re replacing an old roof or building a new one, fixing fireplaces, we’ve got a wider range of skills to meet your daily roofing and chimney needs. Repairs to make sure your roof and, therefore, always be safe.

One of the strengths of e-invoicing is that shipping costs are reduced to zero, significantly increasing activity. 

Online invoicing is one of the many methods of cash flow finance for business you can use to reduce costs and make your business more efficient and effective. In the current market, autonomous companies and small businesses are taking advantage of the benefits of online billing. They discovered that bills sent online are paid faster and look more professional. This help to Avoid Overdue Accounts.

Invoice Finance a Quick Guide For Small Businesses

Although there are many ways to manage a company’s cash flow and, of course, it’s essential to master them if you want to stay afloat, but all the tips to keep it cash become redundant if you discover. that you are already in the middle of cash flow. fight to maintain a healthy cash flow.

When your small business is experiencing a liquidity crisis, you will probably find it hard to find a lifebuoy and many offers will be offered because liquidity solutions are the burden of many financial companies.

One of the most discussed topics will be billing funding, a safe and healthy term covering several financing options. You can also listen to it in the form of cash flow financing, accounts receivable financing, debtor financing or sales financing, but what is it?

In simple terms, Invoice Finance is a means by which a company can use its debtor portfolio as collateral and, in general, release up to 85% of the cash associated with waiting for the money owed to the company for outstanding debts. Many industries rely on this type of commercial financings, such as agencies providing temporary staff, because their usual practices involve unusual cash flow situations, as they will have to pay a large number of people a week or a day, but expect to pay staff supply bills for about a month.

The term Invoice Financing actually covers three main types of financial solutions and while they all have the same objective of releasing a company’s cash and all use unpaid invoices as collateral, they all operate in a subtle way but fundamentally different.

Factoring

With factoring, a financial company intervenes and assumes the administration of the sales book and the credit control of a company. In essence, invoices are “bought” at a high percentage of their value to release money from the company and the factoring company then sues the debtors in the usual way. Many small businesses prefer this because they often do not have the facilities to manage their own credit checks.

Invoice Discounting

In addition to the fact that it releases a similar amount into the business with unpaid invoices used as collateral, but that is usually a confidential service without customers knowing that the financing is being used. Unlike factoring, a company will maintain its credit control management. Large companies with credit control services or companies that do not feel comfortable with customers know that their financial arrangements often opt for discounted invoices instead of factoring.

Asset-Based Lending

When, as with the other two previous loan options, cash is released into overdue accounts, asset-based loans release money into all potential assets of a business. In general, this can include goods, equipment, machinery, inventory and even the brand of the company if they have enough value, as well as the usual bills. Clearly, this is a way to raise much larger sums and is more often used when a single event has triggered a cash flow crisis or to finance an expensive undertaking, such as a merger or acquisition.