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I am often amazed at how much disbursements cost factoring clients over and above the ‘headline’ charges. It is not uncommon for some clients to be paying more in disbursement charges than they do in service fee and discounting fee combined.

I was with a client yesterday where this was the case. When I spoke to them about the fees they were very upset about the ‘games’ the factoring company concerned were playing.

The client advised that they would request a payment by BACS on a Monday so they would have money by the end of the week. This is good forward planning. When Thursday or Friday arrived no money would materialise. An urgent call would be made to the factoring company and they would agree to do a same day transfer but would charge £40 + VAT.

The client had also been hit by 2 bad debts totaling £37,000. The debt is not collectible and the funding was removed from the client as soon as they realised the situation. However, the invoices have been left on the factors system and simply sit in the end column. Maybe just an admin error but one that the lender charges 1% of the unapproved debt as a ‘refactoring charge’.

To brighten up my day the client showed me correspondence between them and the client manager. The client would send a simple one line question and would receive back an essay in response that while expansive did not really answer the question.

We will be looking to move the client to a new lender. The charges will be fully explained and we will ensure there is an open and honest communication channel between the lender and the client.

When you set up a facility it is important that you consider the all the potential costs that you may incur. Beyond the headline rates of service fee and discounting fee you may have a raft of additional charges that may not be obvious. It is best to obtain expert advise so that you can make an informed decision.

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