When contracting with an invoice finance company, it is critical that you do your homework and choose the company carefully because it is likely to be a close ongoing relationship and valuable support for your business. Making the wrong choice will cost you time, effort and add unnecessary stress.
There is likely to be much choice in what has become an increasingly competitive industry. Thus you will need to come up with a shortlist of potential contenders before you do a deep dive into their business track record, skill and services they have to offer.
Below we discuss some of the dos and don’ts that you need to consider if you want to find the financing partner that best meets your needs.
- Do find an invoice partner that you are confident will represent your business professionally and efficiently. Check out how they sell themselves on their website and whether they come across as a successful business at the top of their game.
- Don’t choose an invoice finance company that could sully your reputation with your clients. It is particularly crucial that you find a compatible company if you want to make use of their factoring services. You will be handing over your entire accounts receivable book and relying on them to oversee the invoice payment and debt collection process. They will be in regular and close contact with your customers, and if they do not deliver the same level of excellence that you are striving to achieve, it will harm the way the customer views your company.
- Do choose an invoice finance company that has a sufficiently long performance track record and is highly regarded in the industry. An invoice finance company that has been operating for years will have the experience of navigating different market conditions and dealing with a diverse range of customers. You can find out how long they have been operating by reading through their About Us section on the website and if you don’t find it there you can ask one of their sales representatives
- Don’t choose an invoice finance company because they are cheaper than the others but you have doubts about their credibility. In the long-term, this will prove to be far more costly than finding a company that offers value for money and gives you peace of mind regarding your invoice payment process.
- Do decide whether you would prefer a traditional, person-to-person relationship with the finance company or whether you would prefer to contract with a finance company that operates primarily in the digital world. Many businesses are opting to source financial services digitally because of the lower cost and faster service they offer. But it will depend on your level of comfort with the online digital world of finance.
- Don’t sign up with a digital invoice finance company until you are confident they have the customer service support you may need if there is an emergency or you are concerned about the progress of one of your invoice payments. They must be able to deal with your requests and queries quickly and efficiently.
- Do make sure you are completely clear on the terms of the contract you are entering into with the invoice finance company. Find out what fees they will charge and whether there are any that are not obvious. It is most important is to negotiate and establish the discount they will apply to the invoices they finance.
- Don’t forget to find out who will be liable if a customer fails to pay. Invoice finance companies generally offer you recourse or non-recourse financing, which is likely to affect the cost of their services. Recourse financing will leave the responsibility of the customer paying the invoice with you. In contrast, non-recourse funding means you don’t have to worry at all about whether the customer pays the invoice or not because the finance company will still cover the value of the invoice.
Putting in the legwork needed to find the right invoice finance company to meet your ongoing invoice financing needs will enable you to get the most out of what they have to offer. It will also free up you and the rest of your staff so that you can focus on the other essential aspects of the business that will assure your future growth, profitability and sustainability.
