Factoring

[Mwebb]

I have been having a look around my hsbc internet banking at it appears they offer a factoring service where you can pass you invoices off to them to collect for "upto" 85% of the invoice value.

Just wondering if anyone has any views on factoring companies, or any experience. Is it worth adding that debts may be passed to factoring companies within your terms and conditions of credit??

Thanks

Michael

PS i start trading a a few weeks so no bad debts so far, but looking at contingencies for bad cash flow at present!

 

[Admiral Collections]

Look around as you say you have been doing. IanJ factors, he should be able to help you out

Nic :wink:

 

[Alpha]

Factoring is a useful way of getting short term finance particularly for growing companies. It should not be used for funding long term assets or covering up a business that is unprofitable.

As far as factoring goes if you are seriously considering this form of financing it would be worth talking to a number of independant people about what is most suitable for your business (IanJ on these forums would be a good person to talk to)

 

[Mwebb]

I am really only looking for contingencys for bad debts. I don't/won't have the time to chase them up, so should they occur, i want a plan in place for dealing with them.

Obviously a strong system for vetting those that are allowed credit is important in this process to begin with.

Is there anything else i should be considering?

 

[Admiral Collections]

Credit check potential clients

Have a credit control system in place, they are so easy to implement, I will help you with that free of charge. If you don't like the idea of ringing a client for money find someone in your organisation who will. Credit control isn't rocket science, just follow the systems in place and you will be laughing.

Terms and conditions - see Jon at Handson or Antonia at Limeone if oyu haven't any T & C's in place already.

State on all invoices and statements your payment terms.

And a big point, on the aged debt NEVER overlook the 30 days column and just address 60 days +. Remember if they aren't addressed this months 30 days is next months 60.

Thats about it, if all else fails long term, I will assist you, no worries.

Nic :wink:

 

[Mwebb]

You see, i start trading in about 2 weeks form now. I didnt want to even give "billing accounts" to car dealers, but realised without an invoicing system in place i would lose business.

I used to work for a dealer. One of the largest main dealers in the country/europe...I won't name names, but they had an unofficial policy of putting off payment for as long as possible. I mean months and months if they could get away with it....and not just small companies either.

I understand that this is some cashflow management strategy, but surely if everyone paid on time, then it is not necassary?

Thanks for the advice. Is ozzy's quick credit reports a good place to credit check car dealers? I will even check the main dealers.....as i know what they are like...see above!

Someone at Antonia's office is helpping me with general T and C's so will get some advice there i think aswell.

Good point about not just targeting the ldest debts and forgetting the newer ones...thanks again

Michael

PS is it worth adding penalty clauses for late payment to terms, or will this just put people off using us?

 

[Admiral Collections]

You see, i start trading in about 2 weeks form now. I didnt want to even give "billing accounts" to car dealers, but realised without an invoicing system in place i would lose business.

I used to work for a dealer. One of the largest main dealers in the country/europe...I won't name names, but they had an unofficial policy of putting off payment for as long as possible. I mean months and months if they could get away with it....and not just small companies either.

I understand that this is some cashflow management strategy, but surely if everyone paid on time, then it is not necassary?

Thanks for the advice. Is ozzy's quick credit reports a good place to credit check car dealers? I will even check the main dealers.....as i know what they are like...see above!

Good point about not just targeting the ldest debts and forgetting the newer ones...thanks again

Michael

PS is it worth adding penalty clauses for late payment to terms, or will
this just put people off using us?

In relation to invoicing etc try Kashflow ran by Duane. Free trial if it isn't for you nothing to lose but will deal right from the outset the invoicing issue.

As you stated, people in your trade try to put off payment hence why a credit management strategy is essential.

Ozzy reports will do the job nicely.

Late payment interest etc is standard in many companies terms and conditions it shouldn't put people off trading with you, if it does, CREDIT CHECK them and strongly consider from the outset if you wish to deal with companies that can threaten your cash flow and ultimately your business success.

You are in safe hands with Antonia she is fantastic.

Good luck

Nic :wink:

 

[Sprinta]

Most companies who I've dealt with have factored have serious issues.

I would steer clear of that route. Your profits will be eaten away as they send out reminder letters on 30 days net rather than at the end of each month. A MD of a small supplier of ours went this route to free up cash and went under in 8 months.

:idea:

 

[Ian J]

Most companies who I've dealt with have factored have serious issues.

Likewise I have known of many printing companies that have defrauded factoring companies so I assume by your logic that makes all printers bent.

There are currently over 43,000 companies in the UK who are factoring or discounting their debts and between them they are generating a combined turnover in excess of £160billion per annum.

Of course some companies that factor their debts "have issues" but that tends to be more to do with the poor management of the company itself than the fact that it is factoring. It is much more likely that it was problems within your supplier that caused it's demise than the fact that it was factoring but many people always prefer to look around for someone else to blame for their own shortcomings.

Far, far more companies that don't factor their debts also "have issues" yet you don't seem to get people on internet forums advising others not have a bank overdraft as it's bad for you.

It is absolute rubbish to suggest that reminder letters are sent out after 30 days and not at the end of the month as not only can the computer systems be tailored to send out reminder letters whenever the client wishes but the better factoring companies don't waste their time sending them out at all.

To get back to Michael's question, factoring is the best financial option available in the right circumstances but it isn't really designed for what you have in mind. You would be better off setting up a decent credit control system yourself and using someone like Admiral Nic if you are having problems.

 

[Mwebb]

Ian,
Thanks for your honest reply!

Michael

 

[Sprinta]

Likewise I have known of many printing companies that have defrauded factoring companies so I assume by your logic that makes all printers bent.

LOL maybe.

There are currently over 43,000 companies in the UK who are factoring or discounting their debts and between them they are generating a combined turnover in excess of £160billion per annum.

Great news for you, we all need to make a living.

Of course some companies that factor their debts "have issues" but that tends to be more to do with the poor management of the company itself than the fact that it is factoring. It is much more likely that it was problems within your supplier that caused it's demise than the fact that it was factoring but many people always prefer to look around for someone else to blame for their own shortcomings.

Ok, again fair point. However if you are running a succesful business you will be cash rich and therefore factoring is not needed - wouldn't you agree ?

Far, far more companies that don't factor their debts also "have issues" yet you don't seem to get people on internet forums advising others not have a bank overdraft as it's bad for you.

Granted - it's your business. I can understand your defensive stance.

It is absolute rubbish to suggest that reminder letters are sent out after 30 days and not at the end of the month as not only can the computer systems be tailored to send out reminder letters whenever the client wishes but the better factoring companies don't waste their time sending them out at all.

I was using that as one example, the HSBC in this case didn't really care what the client wanted or told them. Smaller concerns will of course be more customer orientated.

To get back to Michael's question, factoring is the best financial option available in the right circumstances but it isn't really designed for what you have in mind. You would be better off setting up a decent credit control system yourself and using someone like Admiral Nic if you are having problems.

At last, you agree with me

 

[Ian J]

if you are running a succesful business you will be cash rich and therefore factoring is not needed - wouldn't you agree ?.

You do seem to be financially naive if you think that successful businesses are necessarily cash rich.

 

[Sprinta]

You do seem to be financially naive if you think that successful businesses are necessarily cash rich.

There you go again with your hostile tone.

Enlighten me.

I'm all for learning, but teach me in an informative and non condescending way.

Regards

Simon.

 

[DuaneJackson]

if you are running a succesful business you will be cash rich and therefore factoring is not needed - wouldn't you agree ?.

You do seem to be financially naive if you think that successful businesses are necessarily cash rich.

He does have a point Sprinta. I'm running two businesses that would defeinetley be classed as succesful, but they're not cash rich.

I'm not sure where Ian said that a business with 100k in the bank is worse off than one without though.

 

[Sprinta]

He didn't which is why I removed the point.

Like I said above - enlighten me, I'm all for learning.