Get the Best Steps for the Right factoring Process

The factoring contract can take 3 forms to meet the requirements of all companies:

Classic factoring

  1. The classic factoring presented in the previous paragraph. You have the choice of offers, between independent services or the complete package including simple cash advance, guarantee against unpaid bills (credit insurance) and full management of the receivables.

If you have taken out credit insurance with a third party, the factor also collaborates without any problem with your insurer.

Factoring not notified in delegated management

  1. Non-notified factoring in delegated management, also known as “confidential factoring”. The factor guarantees the assigned receivables and advances the cash, but you keep the total control of the management of the receivables, and these are not informed of the existence of the factoring contract.

You perform billing, reminders, receive payments and maintain customer relationships. Since the risk is maximum for the factor, the price increases accordingly. Fine utilities for the best factoring invoices now are available.

This formula is intended primarily for companies generating more than 30 million euros of revenue at least, with a solid financial structure, a stable customer portfolio, proven technical expertise and a powerful information system.

Inverse factoring

  1. Reverse Factoring or reverse factoring is for the factor to pay good supplier invoices to be paid in advance in order to benefit from a commercial discount from them. The company reimburses the factor at the normal due date of the invoices.

When to use factoring?

Factoring can help you at every stage of your business life: when you start up, when you run out of cash, and if you find it hard to convince banks to give you a loan; in the mature phase, to support your development, to protect you against the failing customers, to lighten your constraints and administrative expenses.

Factoring is aimed at all companies that work with a clientele of companies or professionals, including public bodies, regardless of their size or field of activity, export or not.

 

Some sectors lend themselves better to factoring: industry, transportation and IT. On the other hand, this solution is rarely offered to the construction industry, hampered by the duration of the work and the risks generated by the multiple intermediate bills.

To find out if recourse to factoring is recommended in your case, study the composition of your customer portfolio: if some accounts represent a very important part of your turnover, the slightest payment problem can impact your finances; Factoring is then the way to reduce risk while improving your cash flow.

Consider also the proportion of your paying clientele on credit with questionable creditworthiness and evaluate your ability to withstand outstanding payments (amount, frequency).Lastly, factoring will be particularly beneficial if you have a seasonal business because it keeps pace with your sales.

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