Factoring might sound like a complicated process, but it’s actually a way of managing your businesses finances to give you full advantage of capital that has not yet been paid by invoiced customers. It is a way of creating security for your business by having the receivable finances managed through a third-party. In this article, we will briefly describe what factoring is and how it can help a business stay afloat.
What is Factoring?
Factoring is not the same as invoice discounting. It involves the similar theme of selling invoices to a third-party financial company, but differs distinctly, as a factoring arrangement (otherwise known as the financial company doing the factoring) manages the sales ledger and chases up unpaid invoices. The factor takes on the risk of the invoices and usually the amount of money made available to the company. Doing the work is less than in an invoice discounting arrangement. In a factoring relationship, the factor will first analyse the books of the company considering being factored, and the relationship is disclosed to debtors. With invoice discounting, the relationship between the company doing the work and the company discounting the invoices can be confidential.
Get on with Business, Leave the Numbers to Accountants
You know how to do the work that your business does, whether that’s repairing engines, doing body work, painting doors or doing complete smash repairs. It is technical, hands on labour that is hard yakka and you likely have years of experience in the industry and first-hand knowledge that is invaluable to your clients. What you might not have is an eye for financial mathematics and a knack for chasing outstanding debts with insurance companies and debtors. If that sounds like you, then a factoring company may be just what you need to take the stress out of your business and leave the numbers to professional finance folk.
The other principle advantage of factoring is that you will get capital for your invoices almost immediately, without needing to wait days, weeks or months for the insurers and debtors to pay the invoice.
Working Capital Finance are Industry Leading Suppliers of Financial Instruments to Manage Your Cash Flow
Working Capital Finance are providers of factoring and invoice discounting for smash and auto repairers, panel shops, detailers and mechanics in Australia. If you are considering one or other of these services for your auto repair business, please talk to one of our consultants today by calling 02 9968 2328 or contacting us online.
Please note: The content of this article should be considered informational and not construed or considered to be actual financial advice.