Don’t Make These Invoice Factoring Mistakes
Hiring a company to handle your invoices by factoring makes sense for many businesses. But just like any other joint effort or partnership, a business owner needs to have a full grasp of what the company can offer, and what will be required of them to make the partnership work. Here are some common invoice factoring mistakes that should be easy to avoid if you’re aware of them.
Counting Only on Invoice Factoring to Finance the Business
The greatest advantage of invoice factoring companies is that they will pay you the balances of many outstanding invoices before they are paid by clients. This makes it much easier to plan from a cash flow and revenue standpoint. That said, Invoice Factoring is not set up to be a magic bullet that makes accounts receivable problems disappear. Invoice factoring works at its very best when it’s part of a combination or solutions that limit negative exposure.
Misunderstanding or Overlooking Fees
This essentially comes down to four words: READ THE FINE PRINT! Invoice factoring companies are not charities; they make money by charging businesses either a percentage of transactions or a weekly/monthly/yearly fee (or both.) You need to be very aware of how much of a cash commitment they will require from you and make sure any backers, partners, or parent companies are alright with this arrangement.
Submitting Purchase Orders as Invoices
Invoice factoring companies need copies of submitted invoices. They must see that goods or services were not only sold and delivered, but that the company who hired them has also billed their customers or clients correctly. To avoid wasting unnecessary time and effort, stay on top of your invoicing, and treat invoices with more care and weight than purchase orders.
Misdirecting Payments and not Allowing Time for Processing
Lastly, payments need to go to the correct place, and depending on the situation, this may take a while. Medium to large businesses may have to go through regional or national hubs to process payments. This, of course, takes time. The best thing a merchant can do is make sure the payments are correctly addressed and submitted, and to do so in a timely fashion.
Internet sales transactions may drive your business, and it’s beneficial for you to provide options for clients to pay online. It’s still up to you as the business owner to make sure the invoicing process is running smoothly.