Warning! You are about to read a blog following a negative question! Can invoice factoring be bad for business? Read on.
The simple answer is that invoice factoring can be bad for business if there is a lack of understanding and communication between your company, your factoring company, and your customers.
Does your factor understand your business, and the specific demands of customers within your industry? If not, accounts receivable financing could most certainly be bad for business! Any interactions your invoice factoring company has with your customers must always reflect the same level of service you would also deliver to your customers. Choose your factoring company with the same care you take when deciding on the best customers to do business with.
The key lies in the level of commitment and connection your factoring company has with the specialist nature of your business. Factoring your accounts receivables is so much more than just a monetary transaction. Fast service, great rates, generous terms of credit, and exemplary customer service are of course critical. But what can sometimes be more important is a deep understanding of what matters when it comes to your specific industry.
When you sign up to factor your invoices, you submit your outstanding accounts receivables to your factoring company. The factor advances an agreed percentage of the invoice amounts and then collects payment from your customer. Once the invoices are paid the difference is passed to you minus a small invoice factoring fee. The key point here is that the factor interacts with your customer to collect the money. This interaction should never be a concern, which is why it is so important to establish how your factoring company interacts with your customers.
When choosing your invoice factoring company, make sure they can demonstrate a good understanding of your specific industry. If you are in the trucking business, do they know how to address your customers? Speaking to government contract clients can sometimes require a completely different approach than addressing the needs of clients in the staffing or manufacturing industries for example. If you are already using an invoice factoring company and you are not happy with the way they are interacting with your customers, it is not as difficult as you think to make a change.
It is also important to remember that your customers are still your customers, just because invoice collection is coming from a different source. The benefit of using a reliable factoring company who understands your customers is that you can work as a team. If you know that you will consistently be paid on time you can spend more energy cultivating your customer relationship and interacting on a deeper level to generate more business.
Ask the right questions, and establish that your factoring company will work as an extension of your business. Bay View Funding’s industry experts are ready to answer your questions.
Each member of our dedicated team promises to genuinely, and personally provide you with the best factoring solution to meet the unique and specific needs for your company. We are committed to a 100% satisfaction guarantee.