One of the most important factors in any company is cashflow. As we know, many clients you deal with will expect some type of terms of payment and often if you have too many orders, cash flow really does become and issue. In a nutshell, its small business funding and invoice financing.

The 2 options are get the client to pay with order or there is Invoice factoring.

What is Invoice Factoring and Debt Factoring?

Simply put, invoice factoring equals cashflow. You submit your invoice to the factoring company, they in turn will advance you up to 60-80% of the funds straight away. So for example the tweety biscuit company fax’s an invoice to the factoring company for £2000, then a couple of hours later (after the factoring company has verified the order) you can go along and collect your cheque. Really as simple as that.

What does Invoice Factoring cost though?

The cost is agreed initially with you by the factor company and its usuall 5-8% of the invoice value. In reality, you are selling the invoice to this company and in the event your client breaks there agreement, the factoring company will chase it to a degree.. but there are minus points..

If your client does not pay the bill, the factoring company will usually instigate a “charge back” to your account, meaning your account will show a minus figure. This can have a dire effect on your cashflow off course, however if you run a credit check on your client prior to accepting there order, this will reduce your risk of supplying them.

So to sum up; yes invoice factoring is a good idea, just make sure you read the small print ect before committing yourself to an agreement.

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