Why People Use Invoice Factoring Services

| Posted: 18-05-2008 | Comments: 0 | Views: 19 | Rating: (53)

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Many firms get into difficulties because they do not get paid on time. They will have done the work to the correct standard and on schedule. They will have paid suppliers and bought materials. But the customer drags their feet about paying them. Many different reasons will be offered for non-payment, which the unfortunate unpaid firm will have to spend time discussing, dealing with and following up after waiting for the payment to arrive. In addition to being frustrating and demoralising, dealing with the non-payment situation will drain the unpaid firm’s resources further, slowing down the process of bringing more sales in. Many unfortunate firms go out of business this way. On paper they have enough money, but the money is not in their bank account. This is why many firms use a supplier of invoice factoring services.

Invoice factoring sorts out the cash flow problem and converts the on-paper money into real money. Straight away, the invoice factoring supplier will provide a welcome cash payment to the unpaid firm against the value of their unpaid invoices. This is how it works. When the client firm raises an invoice for work it has done, the invoice factoring company will pay their client something like 85 percent of what the invoice is asking for. And they usually pay it within one day. So the risk of not being paid, and the problems caused by not being paid, are taken away. The invoice factoring company will then ask their client’s customer for the payment, and pay the remaining 15 percent, minus a modest fee for the service they provide, when they have got the payment from their client’s customer.

So the invoice factoring company becomes a marvellous ally for their client, giving them a flow of ready money in direct proportion to their sales. This enables their client to grow, unencumbered by the unfair stress and debts caused by customers who avail themselves of goods and services without paying for them. Many owners of small firms are good at what they do but are not skilled in bringing money in from recalcitrant customers. Invoice factoring firms are expert at this, preparing and sending out financial statements, phoning up non-paying customers, keeping thorough records and bringing in the much-needed and hard-earned money. They will have heard all the excuses before and know how to respond, firmly and professionally.

Having an effective invoice factoring company on their team, taking care of these kinds of financial issues, means that cash flow is improved. This provides a valuable benefit in terms of customer relations, and money matters do not cause friction and resentment which can damage the relationship with their clients. Having more money in the bank means that firms can purchase bigger qualities of materials and so benefit from discounts offered by wholesalers for large volume purchases. Having a healthy cash flow also means they can keep their suppliers happy by paying them on time. The most important benefit all this is that the client can concentrate on what they do for their customers, and so continue to thrive and grow their business.

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Bibby Financial Services can help firms improve their cash flow by providing an immediate injection of cash against the value of their outstanding invoices. Then as the client raises an invoice, we can release up to 85% of the value of that invoice within 24 hours. The remaining 15% is paid to the client, less a small service fee, once we receive payment from the client’s customer. This means our client’s business has access to an ongoing supply of cash linked to their sales. So as their business grows, so does the amount of funding available to them.
Invoice Factoring from Bibby Financial Services

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Why People Use Invoice Factoring Services

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