Multiple Aspects for the Proper Invoice Factoring

Your customer pays the bill months later or not at all? Factoring providers promise quick pre-financing within a few hours.

The best solutions at a glance

The self-employed know the problem: The payment behavior of many customers often leaves something to be desired. Open invoices will not be paid until months later or sometimes not at all. What is less tragic on the customer side can quickly become a problem for the self-employed. Especially with long payment terms or a growing number of reminders, the liquidity of your own company can be damaged significantly. In the worst case, even a bankruptcy threatens.

This is how factoring works

This can be avoided by using factoring. In doing so, a self-employed person submits his invoices to a factoring company, which settles the amounts due, less a fee, in advance. Depending on the offer, the company either buys the claim completely or only takes care of sending the bill. It is true that many banks and credit institutions have been offering such pre-financing for some time. In recent years, however, some startups have specialized in factoring. In contrast to established providers, they do not require a minimum funding volume, conduct the business exclusively online, and promise to pay open invoices within 24 to 48 hours. You need to have the invoice factoring there now at your support.

Technically, factoring works like this: after registering, self-employed persons generally charge their open invoices and receive a non-binding pre-financing offer within a few minutes. The amount of the payout depends, among other things, on the original term of payment and the creditworthiness of the self-employed. If you agree with the terms and conditions, the amount due will then be transferred to the business account.

Factoring is an alternative form of financing in which the company sells its receivables to a factoring company immediately after accounting. The liquidity thus gained can be used immediately in the company to exploit discounts from suppliers or make investments on their own.

But factoring can do much more. In addition to the financing of receivables, companies benefit above all from the protection against bad debts as well as our accounts receivable management. In short: Waiting for the payment of outstanding bills, administrative expenses for defaulting payers or even a bad debt default – all this is a thing of the past with factoring.

How factoring works:

  • You deliver your goods / provide your services
  • You invoice your services directly to your customer and send a copy of the invoice to The factoring company.
  • The factoring company pays you an advance of the invoice (up to 90 percent of the gross invoice amount) to your account.
  • Your customer pays the invoice directly to the factoring company.
  • After payment you will receive the remaining invoice amount (gross invoice amount minus the advance payment).
  • Factoring works so easily and brings you decisive competitive advantages.

Advantages of factoring

That does factoring for your company

Improve liquidity and creditworthiness

For most entrepreneurs, the financing function is an essential factor for factoring. Within one to two days, the factor will pay for approximately 90% of the open bill – so the company has liquidity when it’s needed: in times of rising or seasonal fluctuations, such as in the pre-Christmas business or in industries where long payment terms are involved are customary.

Comments are closed.

  • Partner links