Many businesses, both large and small,
are turning to factoring as a method of solving their cash flow
problems or to relieve themselves of the task of credit control.
Factoring, or its sister method of invoice discounting, (known collectively
as invoice financing) are ways of borrowing money on the value of
your sales ledger. As more and more businesses realise the value
of this service, so the invoice financing industry is growing and
more providers are appearing in the market place.
You don’t even need a lengthy trading record – although
some factors prefer this, most will now advance money to businesses
which have been trading for less than twelve months, and many who
specialise in start-ups. One type of business, which finds this
especially useful, is the recruitment industry, where clients may
not pay for several weeks after invoicing, but where the temporary
members of staff have to be paid at the end of each week.
This is a decision only you can make,
but as a general rule, the fewer management people you have, the
more important it is for them to concentrate on other aspects of
the business than chasing money from customers. And if you are a
very small business, you may prefer having the sales ledger task
carried out by a factor rather than employing more staff who will
take your total staff numbers into any of the categories which restrict
your freedom of hiring and firing.
Where you have a wide variety of customers and feel that some of
them require special treatment, you should be sure to choose a factor
that will act on your instructions on how to handle such special