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We Could Save You £000s on Your Factoring Costs

Date Added: 05/04/2016  

There are lots of companies out there providing factoring services, and it’s a common misconception that they all offer pretty much the same service. Up front, they do all look similar, but as with most things, the devil is in the detail, or perhaps that should say the quality of service you get and above all how much you pay for that service.

If your company is currently using factoring and you are coming towards the end of your current agreement, then now might just be the time to talk to us because we could help you find a better, more competitive deal that could save you £000s compared to your current deal. And the reason for that? All factoring companies are not the same.

A Reminder of how Factoring Works

Factoring exists because, typically, invoices are not paid on time and that can lead to cash flow problems, which in our experience is the single biggest reason why small and medium business in the UK can struggle to grow. Factoring enables businesses to enjoy the cash flow benefits of having a large part (85% or more) of the value of their outstanding customer invoices in their bank account, often within 24 hours of issue, before the customers have actually paid.

The factoring company provides the funding and then goes on to provide credit control services to chase and collect outstanding invoice payments. Once collected, the remaining monies are paid to you, less of course the factoring company’s fee.

Invoice discounting is very similar to factoring, the difference being that your credit control team remains in control of collecting payments against outstanding invoices.

Together, Factoring and Invoice discounting tend to be grouped under the umbrella heading of Invoice Finance, because both release cash that is tied up current invoices. In recent years, the factoring market place has become more complicated, making it harder to make the right choice.

The Factoring Market Place is Becoming More and More Complicated

Just like the domestic mortgage market, where there are probably hundreds of different mortgages around, with different deposits, terms and interest rates, the same applies to the factoring market. Pick the wrong company or product, and you could end up paying significantly more than you need to in fees. This can diminish the main benefit of factoring, which is freeing up as much money as possible for the best possible cash flow.

Paying more for factoring than you need to can and does happen because the factoring market place can be confusing. You might opt for individual invoice factoring, bulk invoice factoring or even have the factoring company take over the management of the whole of your sales ledger. You might or might not want added credit control and you might or might not want them to credit check new clients.

The reality is that each different factoring product will come with different fee levels – flat or percentage fee – and different lengths of agreement, and it can be difficult to know which one is right for your business.

The Factoring Market Place is also becoming much more competitive

There are some very competitive factoring deals out there right now. It’s a profitable market to be in for the factoring companies. They want your business. The difficulty is knowing how to find the right deal for you and your business.

It’s easy to stick with an existing Factoring provider – after all most of us do that with our banks, but if you are coming to the end of your existing factoring agreement, now is the time to look at what is out there because you could save £000s.

How Much Money Could My Business Save With a New Factoring Arrangement?

Just some quick maths can show you how much your business could save by switching to a more competitive factoring arrangement. For example, a company using factoring on an annual sales ledger of £5,000,000 could save £25,000 per annum if the factoring fee is 2.5% rather than 3% of total invoice value, and that’s a saving worth having. Even on an annual sales ledger of £500,000, that’s still a saving of £2,500 per annum.

These kind of deals are out there. Even if you’ve got more than just a couple of months left on your current agreement, the savings available to you could be enough to buy you out of your current package whilst still offering you worthwhile savings.

All Factoring Companies Are Not The Same. Talk To Us To Find A Better Deal

At 4R Business Recovery, we will help you find you a better factoring deal than your current one. Just like Independent Financial Advisers specialise in finding the right mortgage, we specialise in finding the right factoring provider for your business. We can do this because we have established a national network of factoring providers; we know what’s available and once we talk to you to find out what your requirements are we’ll recommend the best package for you.

So contact us or call us on 0800 038 5140 for a free factoring review. It could save you £000s per year.

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