Learn How to Lessen Costs in Invoice Discounting and Invoice Factoring

Jan 14 by Make Money Online

In our economic climate, everyone is looking for cost savings and for businesses, invoice finance facilities including invoice factoring and invoice discounting could be a good way to obtain cost savings.

The following are 6 ways in which to lessen the costs of invoice factoring or invoice discounting:

1. Consider changing products – Based upon if you are currently using invoice discounting or invoice factoring you might be able to make a cost saving by switching products. If you are currently using a factoring facility, and you’ve got existing resource within your business that might deal with credit control, it could be that you can save money on your invoice finance costs by switching to an invoice discounting facility in which you do not receive a credit control service as part of the facility. It means that the facility could be affordable. Alternatively, should you be currently using invoice discounting and you have existing credit control staff within your business, by switching to invoice factoring you’re going to receive a credit control service as part of the facility and this may allow you to reduce your staffing cost by not employing credit control staff.

2. Switch between selective and whole turnover invoice finance – Most commonly it is on a “whole turnover” basis that most invoice factoring and invoice discounting facilities operate. This means that all of your invoices are automatically captured under the invoice finance arrangement and the charges are likely to be determined as a percentage of the value of your invoicing. In times that you don’t have a consistent requirement for cash in your business like during seasonal trading peaks and there’s demand for funds, a selective facility that factors or discounts certain invoices and cuts down on cost of the facility could possibly be your solution.

3. See the Bad Debt Protection – In the event you already have bad debt protection as part of an invoice factoring or invoice discounting facility you should review the effectiveness of that cover. The adequacy of one’s credit limits that are being granted by your invoice company are important and must be pondered. Take into consideration any other provisions of the arrangement such as first loss clauses which show that you are not going to be covered for the first part of any particular loss. By moving to a recourse facility, it is possible to save some money on your invoice discounting or invoice factoring costs should your bad debt protection is not providing you enough cover.

4. Lower the “other costs” involving invoice factoring or invoice discounting – There are numerous of other charges that may be applied through the funder. A good example of this is by taking payments by CHAPS rather than BACS. A BACS transfer is usually provided without charge however, a BACS transfer will need longer to clear, and credit funds to your account, than a CHAPS transfer. If you are able to plan ahead your money flow requirements you may be in a position to switch from using to each other in order to reduce the cost associated with your facility. You should also review the other costs detailed on the statement provided by your invoice finance company (normally monthly). This will help you recognize the type of other charge you’re incurring and look to drive them down. One example is, if you are being charged re-factoring fees, in respect of overdue debts, it could be cost effective to spend a while chasing these invoices in yourself, in order to avoid paying these penalty fees.

5. Exclusions should be examined – Even if things are operated with a whole turnover basis, majority of the finance companies can exclude certain transactions from your invoice discounting or invoice factoring facility. One example is, certain types of transactions may be of no interest to the factor so they may exclude them which can also been known as not notifying those particular transactions. When there are parts of your business that you could manage without receiving finances against like particular clients or certain transactions, asking the invoice company may let you make those non-notifiable, or excluded under the terms of the facility. This may prevent you from needing to pay a fee in respect of those particular varieties of invoices.

6. Do negotiations while looking around – Actually, you will find quite a few facilities for invoice discounting and invoice factoring. It is a competitive market and a new provider will often be able to quote to you better rates than your existing facility. Similarly, if you aware of what’s in the marketplace, your existing provider may be prepared to negotiate your existing rates in order to retain you as a client.

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