Single Invoice Factoring Dos and Don’ts

dos-and-dontsFinancing is one very sensitive issue that businesses make sure to handle with utmost care and caution. There are many methods and alternatives to choose from, each with their varying uses and set of pros and cons. One of the more popular options out there is what we call Single Invoice Factoring and today we’ll discuss a few sets of dos and don’ts to help everyone master the best use of the said method.

Do understand what it is all about. It would be outright silly to make use of it without fully grasping and understanding its procedures, uses, costs, effects, advantages and disadvantages. A smart and successful businessman thinks before he acts.

Don’t transact blindly. Choose the best Single Invoice Factoring Company in your area. Research well. Ask around for feedback and don’t hesitate to interview and inquire your shortlisted candidates.

Do assess customer creditworthiness. To avoid having any problems with delinquent customers and ultimately your factored invoice, make sure to only extend credit to those who are capable of payment.

Don’t mix it up with discounting. With factoring, the provider is responsible for the payment collection and the transaction is a sale of an asset, the right to collect. With discounting, the company retains responsibility over payment collection and is akin to borrowing with the invoice used as collateral.

Do remember that it is not a loan. It is by no means a liability transaction and therefore produces zero debt, interests and other strings attached to it. It is reflected as a increase in cash and a decrease in receivables instead.

Don’t worry about customer backlash. There is nothing wrong about factoring receivables so customers generally don’t hold it against companies. However, for reasons of avoiding confusion with payment, a confidential arrangement may be made so that customers know nothing about the factoring.

Do use it as you please. There is much flexibility and freedom in the use of Single Invoice Factoring. Companies can use it whenever they want to and as frequent as they would like. The choice of which receivable to use will also be the decision of the business and no one else’s.

Don’t factor each invoice individually. If you find yourself using Single Invoice Factoring for all your receivables, it would be best to switch to Bulk Factoring instead. It’s quite the same except for the fact that the latter advances all receivables as a whole instead of one by one making room for more cost savings.

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