What to ask When You Want to Use Invoice Factoring Services

Accounts receivable factoring is a very useful method for increasing cash flow, by making use of funds which you are owed before actually receiving payment. Most financial services companies can offer two different options, factoring and invoice discounting. It is called invoice factoring when you sell your company's accounts receivables, or invoices. It can provide cash, or working capital, fast.

The way it works ios that a factoring services company purchases your customer's invoices, so you get the cash up front, then they are responsible for collecting these debts directly from your customers. A quality factoring company will collect these funds professionally, and it won't hurt the relationship between you and your customers. Another interesting point is that when using this service the payments from the factoring company that you receive are paid directly into a bank account administered by the invoice discounter. Of course you will receive the balance after the charges incurred have been taken out.

Factoring is typically available to businesses that already have strong financial systems in place to make sure that their customers' payments will be reliable. Plus there is no limit to the amount that can be funded. Why? Because the level of finance is linked to the level of your sales, which means that as your business grows the amount of funding available to you also grows. Overall, the best businesses for factoring are those that are growing, because finance will grow proportionately as turnover rises. This is a relatively low cost method for increasing your cash flow but it is still prudent to look into the costs of alternative options before committing to an agreement. Factoring companies usually prefer businesses that receive invoices where it is clear that the goods or services have been delivered.

But be careful not to make an expensive mistake when arranging for a factoring service; they simply pick the first provider they find. Look and research the top factoring companies on page on of Google online. Here are a few questions that you might want to consider when picking a factoring service:

What length of time will it take to set up the agreement ?

What is the total cost of the service?

How fast will you be able to collect from customers?

Who communicates with your customers?

Will there always be someone to contact if a problem compes up?

When would money be available against invoices?

Can export invoices be factored too?

What period time is required to end a factoring agreement?


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Kristin Gabriel works with The Interface Financial Group (www.IFGnetwork.com.) The company provides short-term financial resources including construction factoring, serving clients in the United States, Canada, the United Kingdom, Singapore, Australia and New Zealand. IFG offers factoring, accounting, finance, law, marketing and banking.