Feel Free With Your Business in the Right Invoicing

Factoring is attracting more and more companies that want to relieve their cash flow. Modern method of managing the receivables, it is also a rather complex financial solution. Everything you’ve always wanted to know about factoring without ever daring to ask.

Accounting Vocabulary and Financial Concepts

How to choose a factor?

Thirty players occupy the factoring market in France. The majority of the behemoths are subsidiaries of banking groups: In addition to this list are some players from the industrial world,, a subsidiary of General Electric. Many factored SMEs opt for simplicity and use their own bank. Others, on the contrary, do not want to put all their eggs in one basket and therefore opt for a third party. The invoice factoring companies are important there.

  • Before choosing a provider, make sure that he knows your industry.
  • The relations between a factor and his client being daily, demand to always have the same interlocutor, available to answer you.
  • Finally, most factors have Internet tools for sending files. It’s a real comfort for their customers.

Growth can bring a lot of financial worries … This is the lesson learned by them, whose turnover grew by 30% between 2005 and 2006. At the end of 2005, to face with this rapid growth, the IT distributor is looking for a financing solution. After contacting banks, he finally turns to factoring. “It’s more expensive than bank financing,” he says afterwards. But factoring is the way to go when banks do not follow and a growing company has significant cash requirements. ”

An effective way, according to the leader, to finance his need for working capital.

Growth lever

Formerly used by companies with cash flow difficulties, factoring now appears as a lever for growth, as it allows a company to obtain “cash” when traditional financial solutions are no longer sufficient. How does it work? The company transfers all or part of its unmatured receivables to the factor, which in return gives it a cash advance. Only condition: work with a business clientele. In addition to this financing solution, the factors can guarantee you against unpaid debts (credit insurance) and even take charge of your receivables (collections, reminders and bill collection). If many SMEs opt for the “three-in-one” package, “the three services are independent. To determine the level of service you need, ask yourself if you can afford to pay unpaid bills (and how often) and which part of your customer base is questionable. Finally, try to assess your level of risk by examining your customer portfolio: if it is made up of a multitude of “small” customers, the dangerousness of an outstanding payment is, after all, limited. On the other hand, if you work with a handful of large accounts, then your financial equilibrium can be undermined if only one of them gives you a misstep. Naturally, the more the factor takes risks, the higher will be his commission.

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