Factoring

[Ian J]

I don't agree with your view on factoring companies having more generous credit limits.

I have been in the industry for 40 years but am happy to bow to your greater experience.

If factoringadvisoryservice.co.uk actually advised you as you have quoted it points out the importance of dealing with a specialist factoring broker and not the broking arm of a specialist insolvency practioner as you appear to have done.

 

[Geoff T]

Hi All,

[soap box coming on...you were warned!]

I've been reading through this thread with increasing interest and concern - namesake, would you like to explain why you ignored the obvious?!? - I must confess that I cannot understand why there are so few Credit Control entries on here, to counter the "factoring is good" entries?

To those who's hackles just rose - let me be clear and conciliatory - there is a place for factoring, and for what you offer. It does have it's place and value.

It's just that I don't know where - to me, you're like PPI - pointless, and like "sub-prime"! Let me explain...

Factoring is - by experience - costly, heavy on admin, and restrictive to business growth and/or protection (especially in the current climate), reduces the value of decent credit control, and - in my view - any business considering protecting or expanding their business should look for any other option first!

If no-one else has the "cahones" to say it, I will. Factoring will NEVER replace good, solid, consistent, commerically astute, and pro-active credit control. This is NOT about what I do, it's about the service you offer - take the hint! Change or sink! Learn that the old ways of profit-taking are dying out! (if not, they should be!)

Last, I KNOW! You don't like it! PROVE ME WRONG!

In case you don't believe I'm serious about this, I'll give my direct email addy for directed, and personal, abuse - [email protected] - It won't be a first! and if you want my home address - send an email - I've seen heavies before...

Regards,
Geoff

 

[GRDCredit]

Sorry if it's already been discussed in another thread, but what's everyone's view on factoring as a finance option? Anyone here used it in the past, and anything to watch out for?

Thanks in advance

Stu

I think we need to get back to the original question!

Factoring is, in my opinion, an option as a last resort for finance. When I worked for a high street bank - admittedly many years ago - we would push businesses to our factoring division if traditional finance e.g. overdraft could not be made available, principally due to lack of security. Banks did not like to lend with only the security of an 'intangible' asset like the debtor book. Factor companies were however more expensive and more admin focused.

When I left the bank and joined the corporate world if we received a letter to say that a supplier was now using a factor company and all payments should be forwarded to them the inevitable response was 'they're struggling'

If you can raise finance elsewhere - do so.

Obviously ignoring the finance costs there are other issues. You quite possibly will get paid quicker by using a factoring co, as the customer will be less likely to think they can try to get away without paying...

Sorry to quote a response made so long ago but this is wrong,wrong, wrong, wrong and wrong! If as a professional credit controller I could not get invoices paid quicker than a factoring company I would pack it all in.

Hi All,

[soap box coming on...you were warned!]

I've been reading through this thread with increasing interest and concern - namesake, would you like to explain why you ignored the obvious?!? - I must confess that I cannot understand why there are so few Credit Control entries on here, to counter the "factoring is good" entries?

To those who's hackles just rose - let me be clear and conciliatory - there is a place for factoring, and for what you offer. It does have it's place and value.

It's just that I don't know where - to me, you're like PPI - pointless, and like "sub-prime"! Let me explain...

Factoring is - by experience - costly, heavy on admin, and restrictive to business growth and/or protection (especially in the current climate), reduces the value of decent credit control, and - in my view - any business considering protecting or expanding their business should look for any other option first!

If no-one else has the "cahones" to say it, I will. Factoring will NEVER replace good, solid, consistent, commerically astute, and pro-active credit control. This is NOT about what I do, it's about the service you offer - take the hint! Change or sink! Learn that the old ways of profit-taking are dying out! (if not, they should be!)

Last, I KNOW! You don't like it! PROVE ME WRONG!

In case you don't believe I'm serious about this, I'll give my direct email addy for directed, and personal, abuse - [email protected] - It won't be a first! and if you want my home address - send an email - I've seen heavies before...

Regards,
Geoff

Wow - what have you been drinking tonight!

If the prime reason for factoring is to improve admin, get paid quicker, reduce risk then NO. A far better and cheaper solution is to introduce a professional credit control policy and procedures.

If however you need an urgent injection of cash - e.g. 60-80% of invoice value paid when the invoice is raised then, no, credit control cannot help and factoring may be the way to go.

In an ideal world however you need good credit control backed up by a sensible bank overdraft facility.

Sleep tight!


Geoff

 

[Ian J]

If no-one else has the "cahones" to say it, I will. Factoring will NEVER replace good, solid, consistent, commerically astute, and pro-active credit control. This is NOT about what I do, it's about the service you offer - take the hint! Change or sink! Learn that the old ways of profit-taking are dying out! (if not, they should be!)

Last, I KNOW! You don't like it! PROVE ME WRONG!

What on earth are you on about. Factoring is a financing tool that provides working capital against outstanding invoices and isn't supposed to replace effective credit control but to compliment it.

If a company were to sell something in the first week of the month they wouldn't expect to get paid until the last week of the following month which is about 60 days later - assuming that the customer paid to terms which most seldom do. If you can tell me how "good, solid, consistent, commerically astute, and pro-active credit control" will get that customer to pay weeks before it's due I think that you should share that secret with us all.

Let's not forget that many of the contributors to this thread are involved in the credit control business and have a vested interest in self promotion but outsourcing the credit control is only the answer when the company's own credit control is so poor that no-one is paying as no matter how effective the credit control no-one can make a company pay before an account is due.

To summarise (yet again) a company turning over £500,000 per annum who's customers pay in an average of 60 days will likely have outstanding debts of £96,000 and factoring at 80% will provide a cash injection of about £76,000

The cost of the facility is likely to be about £8,500 which includes both factoring commission and interest and this figure equates to 1.7% of turnover.

The only person qualified to decide whether this is expensive or not is from the company raising the money as only he will know how that extra £76,000 of liquidity can be used. Many companies can raise the cost of their products by 2% thus covering the cost in one fell swoop or can perhaps buy in raw materials at more competitive prices with the extra cash that they have available but the biggest saving / earner is normally the ability to fund higher (and therefore more profitable) levels of turnover.

Compare that scenario with raising working capital from more traditional souces like a bank overdraft and the hypothetical company above is likely to be offered a bank overdraft of £5,000 or £10,000 maximum. Even utilising the services of one of the credit control companies busily selling themselves in this thread will likely only cut down the average credit period from 60 days to 55 which will reduce the debtors by £9,000

There is a huge difference between raising £76,000 via factoring and £9,000 by more effective credit control without taking into account the cost of the credit control or perhaps more importantly the fact that the latter isn't guaranteed and they could end up not reducing the credit days at all.

Obviously factoring isn't suitable for everyone but 48,000 companies in the UK generating £175b of turnover obviously think it is

 

[GRDCredit]

- assuming that the customer paid to terms which most seldom do.

Agree with most of what you say but not this line. Most customers - in my humble opinion - do pay on time when asked!

Let's not forget that many of the contributors to this thread are involved in the credit control business

Guilty as charged although hope you agree that my post above acknowledges that factoring and credit control are two different beasts.

To be fair you are not exactly impartial yourself!



Geoff

 

[Ian J]

To be fair you are not exactly impartial yourself!

I may not be impartial but at least I have attempted to answer the question which was whether or not factoring was a useful finance option"

You won't find me trawling credit control threads telling people that they are wasting their money and that they should be factoring instead - which is exactly what some of the contributors here have been doing

 

[Shaun_Pearce]

For me this has been a very constructive thread. I'm a wiser man

Many thanks

 

[GRDCredit]

For me this has been a very constructive thread. I'm a wiser man

Many thanks

So which are you going for - factoring or credit control (TIC)



Geoff

 

[Geoff T]

Hi All,

I feel a [slightly humble] explanation is called for!

My previous post was - having re-read it - overly confrontational, therefore unnecessary and unprofessional, and as such I apologise for it unreservedly. "take it on the chin time!" My oft-lamented brusqueness is a problem, I know, and - despite my best efforts - can run away with me when I'm on a keyboard, fingers type before brain is engaged scenario!

BTW - namesake - this was the tail end of a 16 hour "day from hell", the beer came after!

Having made my apology though, I'm not reneging on the key points in my post.

I'm not saying good credit control can get payment in weeks before it's due - Ian J - but I AM saying that good credit control can have such an overall benefit to a company's cashflow that - in a "best case" scenario - could preclude the need for more expensive forms of financing. Been there...done that in the last 12 months. Tightening/enhancing credit control allowed the client - admittedly with juggling - to finance a 9M increase in sales without any other form of finance.

To use you own example - let's average it to 2% of turnover - how much extra does that give the client, rather than adding it to the "overhead" column? £180k up in anyone's book is a bonus!

While I remain apologetic for the confrontational tone, I stand by the points made previously. Factoring, invoice discounting, credit insurance, whatever, will NOT replace good credit control. They are expensive, time intensive, and business-restrictive options.

One thing I have learned from this post is not to try to continue beyond my own capabilities, and as I've reached 12 hours today, I will take my own advice, and log off!

Regards to all
Geoff

 

[davek17]

I have been in the industry for 40 years but am happy to bow to your greater experience.

Hi All. I too have enjoyed the thread apart from the above comment from IanJ. There was no need to get personal like that, I was trying to give my experience, not trying to advise anyone and we need to keep things business like on a business forum.

A forum is a place where people seek advice and experience and can constructively comment and argue points with their peers not necessarily get advice from the experts. I have tried to do just that and expose some of the hidden things certain factoring companies have brought into the equation for me, due to being niaive about factoring at the time.

If people know what the right questions to ask are early on then they will waste much less time on making a decision on whether factoring is for them or not.......exactly what the thread asked.

 

[Ian J]

I was trying to give my experience, not trying to advise anyone and we need to keep things business like on a business forum.

You appeared to be passing on the erroneous opinions of an insolvency practitioner as fact.

their main warnings to me were that factoring companies can actually harm your business

The above quote is rather amusing as the people that you have been dealing with are part of the insolvency practice of Leonard Curtis and they have just won themwelves the highly lucrative job of Administrators of Challenge Finance a small Kent based factoring company thus proving that factoring can be highly beneficial to their business

 

[davek17]

Lets not spoil the thread, agree to disagree and leave it there.

 

[Jaydee]

An interesting thread, but I am not clear why it became a credit control -v- factoring debate.

I would have thought that good credit control is an important discipline for all businesses.

Then, if you do not have the cash that you require to trade as profitably as possible, and you are unable to source cheaper and/or less burdensome finance than factoring (because perhaps you have no other security), then you factor.

Then once you are factoring, you still practice efficient credit control to keep your factoring interest down + less likelihood of a refactoring fee + less likelihood of a bad debt.

 

[Geoff T]

An interesting thread, but I am not clear why it became a credit control -v- factoring debate.

I would have thought that good credit control is an important discipline for all businesses.

Then, if you do not have the cash that you require to trade as profitably as possible, and you are unable to source cheaper and/or less burdensome finance than factoring (because perhaps you have no other security), then you factor.

Then once you are factoring, you still practice efficient credit control to keep your factoring interest down + less likelihood of a refactoring fee + less likelihood of a bad debt.

[holds hands up] That'll be my fault - as previously posted, my apologies again to all:redface:

well said

Regards,
Geoff

 

[Simon.Culpeper]

Great Thread Everyone

At the risk of opening a can of worms, I think that Factoring in it's full form can be the astute and quality credit control that Geoff speaks of.

I will admit to being very biased working for a Factoring company myself but we have a DSO well below the industry average and many of the clients we work for especially some of the smaller one band guys who would much rather have one of our full time credit controllers working for them than either: A doing it themselves alongside their other responsibilities or B Hiring someone else to do it.

I am more than aware of the risks perceived of someone else performing a companies credit control especially with the presence of refactoring fees but I refuse to beleive that we are the only company out there who perform good quality credit control for their clients whilst still providing the funding they require.

Si

 

[Ian J]

I refuse to beleive that we are the only company out there who perform good quality credit control for their clients whilst still providing the funding they require.

Quite right. You're not

 

[GRDCredit]

Aaaaaaaaaaaarrrrrrrrrrrrrrrrrrgggggggggggggggggghhhhhhhhhhhhhhhhh!!!!!!

Let this thread die!











(Credit Control is far more effective than factoring!)

 

[Gillie]

Aaaaaaaaaaaarrrrrrrrrrrrrrrrrrgggggggggggggggggghhhhhhhhhhhhhhhhh!!!!!!

Let this thread die!











(Credit Control is far more effective than factoring!)

Horses for courses ... rather a sweeping statement to say that all companies will benefit from credit control instead of factoring ... aint that the beauty of business in that there is NO quick fix or ONE solution for every company??

 

[GRDCredit]

Gillie

I know from another thread that you have not had the best of days but trust me that post was intended tongue in cheek and needs to be read in conjunction with the rest of the thread.


Geoff

 

[Gillie]

Oh I read the rest of the thread with interest, professional interest that is, as my company offers short term finance in its many forms as well ... we also deal with a form of credit control as well with a different company ... so guess that means I have a foot in both camps, and speaking from my many years (heck will someone get upset at me admitting to being old!) that as I said, what suits one business, does not suit another and will not work or be the most effective means of solving a situation.

And yes I do know you have a sense of humour

 

[Geoff T]

Hi Gillie,

to take you up on a point if I may...

if we does assume that we are all adults on here (16 hour days notwithstanding!:redface then we are all over 18...

With an ageing population, (few) of us can claim to be 21 anymore...

Therefore the only sane conclusion, bearing in mind your previously well-composed response, one can only conclude that puts you above that, say 25...

The use of the emoticons clearly proves you're below 30, as 40+s can't find 'em! It's like texting on a "mobey" (anyone fancy programming my betamax for me?)

LOGICALLY THEN - that puts you in the 25-30 age bracket, which as an over-40 makes you a "pup" in my book!!

Regards
Geoff

 

[Gillie]

Hi Gillie,

to take you up on a point if I may...

if we does assume that we are all adults on here (16 hour days notwithstanding!:redface then we are all over 18...

With an ageing population, (few) of us can claim to be 21 anymore...

Therefore the only sane conclusion, bearing in mind your previously well-composed response, one can only conclude that puts you above that, say 25...

The use of the emoticons clearly proves you're below 30, as 40+s can't find 'em! It's like texting on a "mobey" (anyone fancy programming my betamax for me?)

LOGICALLY THEN - that puts you in the 25-30 age bracket, which as an over-40 makes you a "pup" in my book!!

Regards
Geoff

Such a charmer!!

I have a nearly 20 yr old daughter away at uni ... so yes I was merely a blip when she was conceived!

 

[Geoff T]

Such a charmer!!

I have a nearly 20 yr old daughter away at uni ... so yes I was merely a blip when she was conceived!

'nowt wrong with being "precocious" (and yes - had to spell-check it!)

 

[Happy2Help]

Sorry if it's already been discussed in another thread, but what's everyone's view on factoring as a finance option? Anyone here used it in the past, and anything to watch out for?

Thanks in advance

Stu

Its ok if your small enough and dont have the time to chase payments etc, but the fees are expensive

 

[Geoff T]

Its ok if your small enough and dont have the time to chase payments etc, but the fees are expensive

so...let me guess...the point here was to get back to the original question?!?

 

[Isabel230]

I worked in a large company, and a lot of our suppliers used factors, and I hated them, with a passion. Everytime there was quereis, the account would be placed on stop. Often I would be on the phone talking to someone who did not have a clue about, how accounts worked. They would always believe that the fault was with us, and not them or the suppliers. To this day, I do my best to keep well away from them. They cause more trouble than they are worth

 

[GRDCredit]

The thread that just refuses to lay down and die...............

 

[Ian J]

At least Isabel's post is on topic

 

[wizzard]

The thread that just refuses to lay down and die...............

You could exercise some self control and ignore the thread when it pops up on your radar.

 

[GRDCredit]

At least Isabel's post is on topic

My humblest apologies

You could exercise some self control and ignore the thread when it pops up on your radar.

You are of course right. I shall never post on this threa........... oh damn!