How To: Factoring Invoices May Benefit Your Business
It may be time to turn over your receivables and invoices to a factoring company. This move can lead to many benefits for your business. For one, it can free up office time for your staff for other activities and transactions. It can save you time and money, too, when working with an experienced contractor. Of course, there are concerns as well. Someone on your end will still need to keep track of payments, receivables and invoices, especially when you are starting a new relationship with a company.
When switching to factoring, it might be best to start out slowly to make sure it is right for your business. It is probably best to not get locked into a long-term contract at first. A multi-year contract could have high cancellation rates if you are not happy with how things are going. You also might find that the company is charging you hidden fees that it did not disclose, or that its work is not up to your standards. A shorter contract allows you to get to know the company. If you are satisfied with its work in a year or two, you might want to then sign a longer deal.
Keep Track of Transactions
Though your business will no longer be involved with all of the minutiae of payments, invoicing and the rest, it will still have some responsibility. You will need to understand the contract you have signed with the outside company, to make certain you are getting what you paid for. Someone in your office will need to keep an eye on reporting to ensure all payments are made on time, that all checks have cleared and that all invoices are accounted for. In some cases, it might be that your factoring company is not clearing checks in a timely fashion, resulting in slow payments. In situations like this, you will need to follow up and try to remedy the situation.
As in any business relationship, there is the potential for both good and bad. Try to contract with a company that is experienced, trustworthy and reputable. With the right company, you might have to do less work as time goes by. Even so, at the minimum, you will want to review on a monthly basis all transactions for payments, invoices, tax receipts and adherence to record keeping. By getting the right factoring company, and keeping track of its work, you can make your business stronger.