How Businesses are Using Invoice Factoring to Deal with Late Payments (It’s easier than you think!)

The issue of late paying clients is nothing new, having long been a source of angst for businesses the world over.

Smaller firms are often most at risk, with slow payments causing cash flow levels to drop, bringing the threat of insolvency ever nearer. At best, chasing unreliable clients is a frustrating drain on time and resources that would be more effectively channeled elsewhere.

For many fast-moving businesses, waiting patiently for payments to arrive simply isn’t an option, which is why an increasing number are now turning to alternative finance and specifically invoice factoring. Offering direct access to cash that previously might have taken weeks or even months to arrive, invoice factoring is the simple solution to the age-old problem of late payments.

Up to 80% of invoice value instantly

Erase the issue of unreliable payments overnight with factoring services that could provide funding for your invoices within 24 hours of them being raised. That means getting the cash you’re owed quickly and the secure working capital to keep your business moving.

Using invoice factoring means there is no need for emergency loans with rocketing interest rates, and no being caught out by everyday expenses. Without the uncertainty that an erratic payment structure creates, you are instead free to focus on improving your business, taking on additional clients and seeking out opportunities for expansion.

All or just a few?

Just because you have decided to use a factoring service it doesn’t mean that every invoice you receive has to be dealt with in this way. Many trade finance facilities will instead allow you to pick and choose individual invoices that they will finance. This is often called selective invoice factoring, and it’s a flexible way for companies to access finance when they need it, but avoid paying fees on every invoice they raise.

It might then, seem logical to reserve financing for payments that are usually slow, while leaving punctually settled invoices to be paid by the traditional method. However, the higher fees that factoring agencies charge to fund these “high risk” payments mean that many businesses choose to have their reliable invoices financed instead. The revenue this rapidly generates can then be used to cover the hole in profits that is created by consistently late payments.

This more flexible approach to invoice factoring leaves more of the power in the company’s hands, only paying for financing that is absolutely essential. As a means of solving the issue of late payments while keeping costs to a minimum, this approach can be extremely effective.

What else could an invoice factoring company do for you?

Whether you choose to have all of your invoices funded or just a handful, there are other ways that a factoring facility will be able to assist you in combating late payments.

Client Communications – Invoice factoring providers will often take an active role in reducing the impact of overdue payments on a company, following up outstanding invoices on your behalf and communicating with clients in order to encourage faster settlements. Initiated by an experienced finance professional, this could strengthen ties between you and your clients, providing an opportunity for them to explain their unreliable payment schedule, and discuss modifications that could improve the existing trade deal for both parties.

Credit control – On top of negotiating with existing clients, the majority of invoice factoring facilities will also carry out credit checks on potential customers. A frequently overlooked aspect of any invoice factoring agreement, this service can free up vast amounts of time and energy, while also laying a path of sustainability that a company can follow.

At Jardine Norton we provide simple, risk free selective invoice factoring that’s designed to work on your terms. If you are experiencing cash flow issues due to late payments or anything else, we can help.