Invoice financing is used whenever a third party agrees to purchase the unpaid invoices for a specific fee. Invoice financiers can be a part of a bank or other fiscal institution, or individuals utilizing Market Invoice or Platform Black.
In UK, there are two types of invoice financing i.e. invoice factoring and invoice discounting. Invoice factoring incorporates an invoice financier managing the sales ledger of company collecting money on their own. The customers will know the business by making use of invoice finance. When an invoice is raised, the invoice financier will pay money for the debt owed by the client. The financier makes a certain percentage of the cost offered to the company within 48 hours. After that, the financier collects the total amount directly from the customer. After receiving the money from the customer, the financier directs the remaining balance payable to the company. Louisiana invoice factoring companies make use of the same principle.
Advantages of Invoice Factoring
- The sales ledger management is outsourced, thereby giving more time for the business.
- Potential customers are credit checked
- You’re likely to trade with customers paying on time.
- The customers may desire to deal directly with you.
- The imamate of the company is affected like unable to manage debt collection, etc.
Invoice factoring and its affect on customers
There is no need to worry about the customer receiving several calls from the factor. May be the customers avoid hearing from the factoring company at all. Invoice factoring doesn’t perform any collection duties, and the customers won’t get phone calls or letters demanding timely payment. This denotes that you can keep your exceptional customer service record together. If the customers don’t pay the invoices promptly, the factoring company may follow collection action against you. A number of agencies utilize account managers to help business owners maintain the invoices they have sold and bind them with the cash advances. If you’re worried about how factoring will affect the customer service, you can rest assured since you can keep the same relationship with the customers.
No doubt, one of the greatest concerns about the invoice factoring is how it will influence the customer relationships. A majority of businesses grow by cautiously serving their customers. Proficient factoring companies like Louisiana invoice factoring companies understand the significance of the customers and help maintain positive relationships. Infact, good communication is one of the hallmarks of a trustworthy invoice factoring company.
Sometimes your lender notifies your customers to pay for the services provided to them. The customers that are new to invoice factoring have the similar concern. If the factoring company contacts the customers, the involved company can be in trouble. How smoothly notification goes with the customers depends upon the professionalism of the factoring company selected by you.
Some invoice factoring companies necessitate that every invoice issued by you needs to be confirmed. This may create an insidious situation for the customers’ accounting departments and can greatly affect your association with them. Louisiana invoice factoring companies are proficient enough to deal with the customers in a satisfactory way.