The greatest threat to any business is a lack of cash flow. No matter how great your product is, how wonderful your staff is, or how loyal your customers can be, if you don’t have the cash flow you’ll be closing your doors. When you’re experiencing cash flow issues, rather than caving in and giving up, you can factor your invoices with a factoring company. The company assumes the risk for your invoice and advances you funds so you can keep your cash flow steady. It’s a great way of injecting funds quickly when you’re in need of some fast money, and companies have been factoring invoices for hundreds of years. It’s not at all a new practice, but unfamiliarity with any process can give rise to simple, easily avoidable errors. Many businesses new to factoring invoices, however, make rookie errors that can cost them dearly in the long run, and you simply can’t afford to make these mistakes when it’s your business on the line.
Inaccuracy and Lack of Documentation
Inaccuracy in the financial industry is a massive problem. When you provide information on your business and customers to the factoring company, make sure everything’s as accurate as possible. Mistakes can affect how you’ll be treated by the factoring company, leaving you with inappropriate terms of your factoring or even rejection. Part of ensuring accuracy is providing supporting documentation as evidence of each claim within your document. Remember in school when you were writing essays, and each argument had to be backed up with evidence? Factoring invoices is a similar process, and requires documentation to ensure that everything that you say about your business and industry is correct. Businesses who fail to provide supporting documentation have nothing to support the claims they make in their applications, which is no good to the factoring company and no good to your business either.
Hidden Fees
Although factoring companies tend to be transparent with their fees and rates, it’s common for businesses looking into invoice factoring to ignore hidden fees, or not notice them at all.. You need to stay on top of your factoring so you can get the most out of the arrangement, and not put your business at risk because you failed to properly understand key terms and minimum fees. Make sure you understand everything involved with your factoring arrangement, asking as many questions as possible to ensure that everything is appropriately clarified. Remember, the factoring company doesn’t make any money if you don’t have money, so it’s in its best interests to have you well informed and financially solvent.
