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Factoring invoicing1/23/2024 Even so, the best factoring companies do not employ heavy-handed collection techniques. If you opt for a complete AR management factoring service, a representative of the factoring company will make collection calls if necessary. However, you are still firmly in the driving seat when you factor your invoices. One of the myths about invoicing factoring is that a business somehow loses control of its relationship with customers. Other than that, your sales invoices layout can remain as it is now. You will also need to ensure that payment terms are displayed on each invoice. You will also need to have a formal assignment notice in your invoices, which explains that ownership of the invoice has been passed to the factoring company. Your sales invoices will need modification to show the factoring company’s payment details. Related: 10 Considerations When Selecting the Best Factoring Company for Your Business Do I Need to Modify My Sales Invoices? But you will need to advise new customers how and to whom your sales invoices are to be paid, which you would do if you weren’t using a factoring service. What Do I Tell New Customers?Īs with existing customers, prospective and new customers will have little interest in how you finance your business. However, most people are familiar with the many benefits of factoring. And you could point out that factoring will provide working capital for expansion. For example, you are outsourcing your accounts receivable to improve efficiency and save administration costs. If you are concerned that customers might have the wrong impression of factoring, you might want to explain the move. And you need to specify a date for the change and provide the new payment details. In that letter, you need to advise the customer that you will be factoring your invoices. So, it is best to advise customers about the change in advance.Ī letter to your customer’s accounts payable department will usually suffice. However, you will want to reduce the risk of payments being sent to the wrong place. The only difference is that they will pay the factoring company instead of sending payment to you. When you employ the services of a factoring company, the administrative change for customers is minimal. Related: The Pros and Cons of Invoice Factoring for an Expanding Business What Do I Tell Existing Customers? So, sales invoice factoring is most likely to be viewed by your customers as a wise move rather than a sign your business experiencing difficulties. It might even be the case that some of your customers use invoice financing, too. And, your business will likely be one of many of your customers’ vendors that use a factoring solution. Many expanding businesses use factoring to fund growth. Invoice factoring is far from uncommon these days. Indeed, most people will be more interested in your products and service than how you finance your business. The fact that you outsourced your accounts receivable (AR) will be of little interest to your customers. Will Customers Think My Business is Struggling? So, what will customers think when they learn you are factoring your invoices? How will the move affect customer relationships? Here are the answers to the most common questions about how factoring affects customers. And that fact can lead to concerns about the impact that factoring will have on customers. However, unlike other financing options, your customers will be aware that you have chosen to factor your sales invoices. This off-balance-sheet financing option releases the cash locked up in accounts receivable, improving cash flow and increasing liquidity. Sales invoice factoring is a financing option for small and large businesses alike. Learn about the minimal impact invoice factoring has on the customer relationship.
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