Do you have a small to mid sized business? Chances are, you’ve most likely come across cash flow problems due to the invoice based nature of your work. Outstanding invoices make it nearly impossible for your business to advance and grow. Thankfully, invoice factoring is your key to get out of a financial rut.
As you know, with invoice factoring, you sell your outstanding invoices to an invoice factoring company for an advance of up to 96% of its total. Do you fully understand what your invoice factoring company is offering your business?
5 Invoice Factoring Mistakes to Avoid
We hear from many businesses in many different industries that have been fooled by other invoice factoring companies. We’re here to help you get the service that you deserve from your invoice factoring company. Here are 5 common invoice factoring mistakes that you should avoid.
1. Using Invoice Factoring for Undelivered Services
When you decide to sell your invoices to an invoice factoring company, it is crucial that you only provide the company with invoices that have been completed or delivered. An invoice factoring company will go through and verify every invoice that you are looking to factor to ensure that they have been completed or delivered. Without a fully complete invoice, you will not be able to receive an advance.
2. Using Invoice Factoring For Long-term Contracts
A contract is not an invoice. A contract is a commitment to your client for future or ongoing work. Many invoice factoring companies will not advance you funds for pending or standing contracts. For recurring billing, you cannot factor a purchase order or contract that is billed a month in advance.
3. Misdirecting Payment of Invoices That Have Been Factored
This is a form of fraud. By misdirecting payment, this means that you are getting paid twice for the same invoice. Not only will this get you in legal trouble, but also tarnish your relationship with factoring companies that will likely choose to not factor your invoices in the future.
4. Not Giving all Supporting Documentation
When you submit an invoice to an invoice factoring company, you will be required to submit all supporting documents with that invoice. This can be anything, including order confirmations, receipts, and other supporting documentation. Without providing all supporting documentation, the invoice factoring company will not be able to advance you any funds.
5. Overlooking Hidden Fees
Many invoice factoring companies tend to hide fees in their contracts. Unlike these companies, our invoice factoring company makes payment amounts very clear. One of the benefits that we provide that not many other invoice factoring companies provide is free credit checks.
Other factoring companies will require you to pay a fee for every invoice that you are factoring, which can result in a large expense for your business. Our invoice factoring company allows you to submit your invoices for credit checks for free, allowing your business to keep some cash in its pocket.
Before you utilize the benefits of invoice factoring, be sure that you avoid these 5 common invoice factoring mistakes.