Factoring Invoices - The Unknown Entrepreneur
I found a really interesting article by a U.K. businessman who goes by the nom de plume of the “Unknown Entrepreneur.”
The title of the article is a tad sensational, but the article is actually well-balanced despite sounding negative at first.
In it the Unknown Entrepreneur talks from personal experience about the positives and negatives of his experience with factoring in the U.K. He writes:
“The positives
1. Increase your cashflow - allowing you to focus on your daily business activities.
2. Insure your risk - it can cost you but remember if you have a net profit of 10%%, any loss your suffer you will have to write ten times the revenue to recover the loss.
3. Fees can be negotiated - as you grow and if you have a clean book you can negotiate your fee down.
4. Your own back end office - if you opt for for confidential factoring your client will not know that you factor and you then collect out your own ledger then pay your factor the money you collect out.
5. If you do not have a back office then non - confidential factoring can be a great bonus as the factors chase the money that you are owed and this can be an advantage as the factors will apply pressure when you need it.”
The author also includes some negatives relating to invoice factoring, including several points that were lessons learned from a particular instance where his company had made an operational mistake. But even though that situation was difficult for his company, he says he would use a factor again, noting in part:
“Keep your operations tight and you will benefit from using factoring services… I would absolutely use factors again but this time would ensure that we would not make a operational mistake like we did.…”
