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Invoice finance companies place huge importance on a businesses audit trail.  The audit trail ensures that the debts are secure and provable.

If you are looking for an invoice finance facility it is important to look at your business and how robust the audit trail is.

Each business will have it’s own quirks and characteristics. As such you will have to focus on finding ways to implement a suitable audit trail.

By way of examples let’s have a look at some traditional robust audit trails that invoice factoring companies expect to see in place.

Wholesalers

  • Purchase order
  • Proof of delivery (signed by recipient)
  • Invoice

Temporary Recruitment

  • Agreed rates
  • Purchase order
  • Signed timesheet
  • Invoice

Design Agency

  • Brief supplied by customer
  • Quote
  • Acceptance
  • Work is submitted
  • Signed satisfaction note (this eliminates queries down the line)
  • Invoice raised

The better your invoice audit trail the better. Importantly you need some kind of 3rd party sign off by way of a signed proof of delivery, signed timesheet, signed satisfaction note.

This may seem like additional administration but it is key to sourcing a facility and it is a good step for your own internal procedures.

Invoice finance can indeed increase profits. However, it is important to remember that it depends on what you do with the cash that the facility generates. It definitely increases your costs as you will have the invoice finance fees to pay so you will need to generate enough ‘new profit’ to cover these additional costs.

These new profits can be generated from new sales that took place because you were able to purchase more stock, fulfill more orders or perhaps pay more staff which will generate additional sales.

I have also dealt with clients who are able to take advantage of substantial settlement discounts. Any saving available that is more than the invoice finance costs leads to increased profitability.

In short yes invoice finance can lead to increased profits. However, that will depend on your own entrepreneurial abilities.

Selective factoring allows you to choose which invoices you factor. This means that you can turn selective factoring on an off as required.

If you have a sporadic requirement for working capital selective factoring can be a cost effective solution for your business.

How does selective factoring work?

  • Selective factoring allows you to notify a single invoice or a batch of invoices to be financed.
  • The selective factoring company will conduct some due diligence.
  • Once they are happy to deal with you you sell them the invoices.
  • The selective factoring company will check that your customers are happy with the products or services you have delivered.
  • They will advise your customers that the invoices have been purchased.
  • You are provided funding by the selective factoring company.
  • On the due date the customer pays the selective factoring company.

If you require selective factoring please contact Smart Factoring Quotes.

Purchase order factoring allows your business to accept the large orders that you have always been waiting for. If you are looking for purchase order factoring it is worth calling Smart Factoring Quotes.

How does purchase order factoring work?

If you have a confirmed order from a credit worthy customer a purchase order factoring company can pay your supplier, typically by way of a letter of credit, for the goods. When the goods are delivered to you the purchase order factoring company will require you to deliver the goods to your customer and raise an invoice.  A traditional invoice finance facility would then be used to repay the letter of credit or loan against import. When your customer pays this repays the invoice finance facility.

The whole trade cycle is financed from the confirmed purchased order right through to your end customer paying.

Benefits of Purchase Order Factoring

  • Peace of mind that payment is only made if the right quality and quantity of goods are delivered by your supplier.
  • Ability to take on large lucrative orders.
  • Credit checking of your end customer provides more peace of mind.
  • Seamless financial support for your business from order right through to end customer payment.

Single invoice factoring, often called spot factoring, is available via Smart Factoring Quotes.

If you are looking to factor a single invoice or a batch of invoices this is possible. Traditional factoring and invoice discounting facilities typically require a lengthy contract that will attract a service fee whether you use the facility or not.  Spot factoring attracts a simple charge which is a small percentage of each invoice and you can pick and choose when to use the service and which invoices you finance. The big advantage compared to traditional invoice finance facilities is the flexibility – you can access cash when you need it rather than being tied in to lengthy contracts that require every invoice to be notified.

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Non recourse factoring seems to cause some confusion and I must admit it has caused me to raise my eyebrow on occasion.

A true non recourse facility means that once a debt is notified and you are within the credit limit set by the lender you have nothing to worry about. If it goes past the agreed ‘recourse period’ the debt is settled by the lender.

However, some lenders offer credit protection/bad debt protection/ credit insurance alongside their finance products but this is not true non recourse. Any bad debts rely on you as the client making a claim. During the settlement period the debt in effect could be recoursed back to as far as funding is concerned. Alternatively the lender may continue to finance that particular debt at the clients expense.

If non recourse factoring is what you are looking for it is important to ensure you understand how any bad debt must be claimed for but also how it will effect your funding.

If you want to know more please contact Smart Factoring Quotes.

Lloyds TSB Commercial Finance have always been aggressive in terms of pricing and also credit appetite when compared to the other bank owned invoice finance providers.

However, recently I have seen their factoring pricing creep up dramatically. In particular the discounting fee. Yesterday I saw a quote where the fee was 4.5% over bank base rate subject to a minimum of 6%. This is 5.5% above the current bank base rate.

Even when compared to the independent providers, many of whom have a higher cost of funds than Lloyds TSB Commercial Finance, this seems expensive to me.

This is fairly disappointing and feels as though the bailed out banking group is taking advantage of SME’s.

I understand they can offer between 3% and 6% so if you are looking for competitive rates be sure to negotiate with Lloyds. Alternatively approach Smart Factoring Quotes and we will source the best rates in the market for you.

Factoring Costs can vary dramatically from lender to lender.  It is important to understand the total costs of factoring and when comparing quotes from different companies it is best to compare the total costs incurred in a year.

Headline rates can be misleading as certain companies will include all set up costs, audits, etc.. within the service fee whereas others will charge over and above the service fee for what they consider additional services. Headline factoring rates can therefore be misleading.

Smart Factoring Quotes offer some online advice on minimising factoring costs.