Increased Factoring Improves Credit Control
In an economic climate such as this one of the first to suffer are small businesses. That’s not because they offer a poor service or are badly run, but because they fail to collect invoices in on time. That’s why more of them than ever before are turning to factoring as a way of freeing up the capital tied up in their invoices.
Bad debt has risen significantly over the past couple of years. Businesses often mis payments or bog down payments in order to improve their cash flow. A few act from a more cynical point of view. They know that small businesses have to run up against tight margins. They hope that if they leave the payment long enough the supplier may be forced into liquidation. In some instances we have seen companies choosing to liqudate themselves and then start up under another indentity just so they could avoid paying a bill.
It seems incredible that this practise is allowed to continue and the government is bringing in new measures to act against those individuals who choose such a line. However, for small business factoring can be the only way of making sure they get paid on time.
First of all we have to define the term. This is about more than simple debt collection, although this is a major function of what the firm does. It enables a company to raise finance against the value of an invoice. The factoring firm then uses its own credit control to collect from the debtor.
Companies can choose to continue with their own in house credit control team or choose out sourse this to the invoice finance provider. They will have a highly dedicated and effective team who may be able to do the job more effectively than you can.
Meanwhile you as a small business owner are freed up to get on with doing what you do best. For any entrepreneurs who spend more time chasing late payments than developing their business that is fantastic news.
Services such as these have never been more in demand. For small businesses struggling along on the margins of survival that could end up making the crucial difference between success and failure. These are difficult times, but long term outlook is good. Businesses just need to survive the next 12 months to make it to calmer waters the other side. However, those facing constant late payment will struggle. Factoring can offer the lifeline they need.