The benefits of Invoice Factoring

Updated: 9 February 2023

Invoice Factoring helps businesses better manage, if not remove entirely, the cashflow problems associated with slow paying customers.

Not all customers pay thirty days after receiving their invoices, with some negotiating terms of up to 120 days, before you see any of the money owed.

For many industry sectors, being unable to pay employees or suppliers on time, buy equipment or pay for other materials, brings risk to the future of the business.

Being able to manage cashflow through the peaks and troughs, and the seasonality of some businesses, is key to success. And that’s where Invoice Factoring works best.

Simply, by factoring your invoices, you automatically improve cashflow, which helps you plan for future growth and manage your day to day operations more effectively.

There are a number of other benefits associated with invoice factoring:

  • You can offer more favorable payment terms to your customers and negotiate better deals with your suppliers
  • You can take on new clients and grow your business
  • As you issue more invoices, you get access to more cash without the need to renegotiate terms
  • It’s great for businesses not eligible for other forms of finance
  • Unlike a business loan or overdraft, it doesn’t add debt to the business
  • It helps you to minimise bad debt as the invoice factoring organisation does much of the credit-checking of your customers and potential customers for you, as it seeks to minimise the risk of non-payment

Factoring organisations do charge a fee for their services, but often, this fee can be offset against the more favorable terms negotiated with suppliers.

If you’re interested in approaching a factoring provider, be prepared to share detailed information about your business: the accounts; the directors; business strategy; customer information and customers in the pipeline.

Your invoices are your assets. If you’ve been in business less than two years, but you can demonstrate a wealth of knowledge in the industry, you will still be considered. They may want to know more about your experience.

Bibby Financial Services offers flexible, factoring solutions. For more information call us on 65 6922 5030.