UK Guide to Factoring
Factoring is a way your business can obtain cash, by leveraging finance off the people and organisations that owe you money - your debtors.
Your outstanding sales invoices could well be one of your largest assets. Many businesses have up to 25% of their total year's revenue owing to them at any one time. This cash is effectively locked and lack of access to it can severely hamper the potential growth of the business. In some situations, it can lead a business into an insolvency problem.
Moreover, many small to medium-sized business don't have the systems in place, nor the resources, to collect outstanding invoices in an efficient manner. Factoring is often a very smart approach to outsource the collection of debts and management of the sales ledger.
Here is an outline of how the factoring process works:
A. Customer receives goods or services provided by your business.
B. You send an invoice to the customer. You also send a copy to the factoring company.
C. Over the next one or two days, the factor pays you an agreed percentage of the value of the invoice.
D. The factoring company collects the money off the customer.
E: The factoring company pays you the remainder of the invoice less their agreed fee.
Business Data has partnered with some of the UK's largest factoring organisations.
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