Originally posted 2012-01-03 01:36:46. Republished by Blog Post Promoter

In the current economic climate, everyone is looking for financial savings and for businesses, invoice finance facilities such as invoice factoring and invoice discounting can be a good source of financial savings.

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

1. Altering your products – A business can create a cost saving through switching products yet depends on what service one is using whether invoice factoring or invoice discounting. Should you be currently using a factoring facility, and you have existing resource within your business that could 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. Hence the facility may be cheaper. 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 included in 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. Therefore all of your invoices are automatically captured with the invoice finance arrangement and the charges are likely to be determined as a percentage of the value of your invoicing. If you do not have a consistent requirement for cash within your business, for example if you are subject to seasonal trading peaks and it’s these that you require funding for, you may be better off considering a selective facility in which you only factor or discount certain invoices, hence reducing the cost of the facility overall.

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 assess the effectiveness of that cover. The adequacy of your credit limits that are being granted through your invoice company are important and must be thought about. Take into consideration any other provisions on 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. In the event that your bad debt protection is not providing you with adequate cover, you may wish to save some money on your invoice factoring or invoice discounting costs by moving to some recourse facility (where you do receive bad debt protection).

4. Drive down the “other costs” involving invoice factoring or invoice discounting – There are numerous of other charges that may be applied by the funder. An 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’re able to plan ahead your cash flow requirements you may be able to switch from using to each other in order to reduce the cost associated with your facility. Its also wise to review the other costs detailed on the statement provided by your invoice finance company (normally each month). This will assist recognize the type of other charge you’re incurring and seek to drive them down. For example, if you are being charged re-factoring fees, in respect of overdue debts, it could be economical to spend some time chasing these invoices in yourself, in order to avoid paying these penalty fees.

5. See the exclusions – Most invoice finance companies have the ability to exclude certain transactions from your invoice factoring or invoice discounting facility, even if it is operated over a whole turnover basis. For example, certain types of transactions may be of no interest towards the factor so they may exclude them which can also been known as not notifying those particular transactions. When one can find parts of your company that you could manage without receiving finances against like particular clients or certain transactions, asking the invoice company may enable you to make those non-notifiable, or excluded under the terms of the facility. This may prevent you from the need to pay a fee in respect of those particular types of invoices.

6. Look around and renegotiate – There are a variety of providers of both invoice factoring and invoice discounting facilities. It is a competitive market and a new provider will often be able to quote to you better rates than your existing facility. Similarly, for those who aware of what’s available on the market, your existing provider may be prepared to negotiate your existing rates in order to retain you as a client.

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