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Cash Flow Management

How does factoring work?

  1. You send your customers invoices for sales or completed work. Since you will have to give the factor a legal assignment of your sales ledger debts, you must add this fact to your invoices, which is normally done by attaching a sticker to them. This means that your customers will know you are using a factor.

  2. You send all the copy invoices to the factor (usually in batches of an agreed number or value or at regular intervals such as one week).

  3. The factor pays you a percentage of the total value of the invoices. This will be up to 90%, and is paid either as soon as you send the invoices, or at a time agreed between you and the factor.

  4. The factor can help run your sales ledger, issuing statements, collecting payments and chasing slow payers if necessary, with methods agreed with you at the outset.

  5. The factor pays you the balance of the invoice totals, less the agreed charges when your customers pay. These consist of a service fee a percentage of the invoice values and an interest charge on the funds advanced to you. These costs are dependent on the complexity of your sales ledger, the size of your business, and the level of funding your business requires.

Where you have existing unpaid invoices when you start factoring, the factor will take over that sales ledger and advance you an agreed percentage on ‘qualifying’ debts (i.e. those which are not in the ‘problem’ category).

Where appropriate, electronic links can be provided to help streamline communication, and give you faster access to your cash.

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welcome to factoring
introduction to factoring
factoring - enquiry form
factoring - the facts
how does factoring work?
how does invoice discounting vary from factoring?
how does invoice financing work?
possible disadvantages of factoring
improve your business cash flow
why factoring?
how do I set up a facility?
the solution for owner managed businesses?
is factoring for you?
are your clients credit worthy?
how to reduce business risk
effective debt collection
what if your clients will not pay?
the iva procedure
why you should pay your invoices on time
what is trade credit insurance?
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