Factoring is a relatively simple process, and as long as an agreement has been set up by a reputable factoring service provider with conditions that can be consistently met, then the advantages far outweigh the costs or potential inconveniences. However there are some risks that should be carefully considered prior to entering into a factoring agreement. Handing over control of your sales ledger and customer communication, for instance, may place restraints on the way your business operates, with customer credit checks possibly causing delays or changing the way you trade along with the risk of upsetting customers who prefer to deal directly with you rather than a third party. However, as long as the factor’s processes and contract terms have been clearly laid out and approved, disruption should be minimal.
An additional question: Respond to this Question
- What criteria should I consider before choosing a factor?
- How do I assess the quality of factoring companies?
- Must I work with a factor in my location or can I work with one in another city?
- When does it make sense to use invoice discounting rather than factoring?
- Who are the major UK factoring companies?
- Should I use factoring or a bank overdraft?