Interest free loans! Sounds great doesn’t it? Well that’s what businesses do when they offer credit terms to their customers. Sure it’s considered normal to allow a customer thirty days to get their bookkeeping in order to pay the bills. But very large companies especially, take advantage of this largesse and take 60 – 90 days to pay an invoice. That becomes 3 months of interest free money. Your money. You are essentially helping to grow their company using your resources.

This problem is compounded by a small business that finds a big customer and keeps working and working for them building up a significant backlog of accounts receivable. Once some of these invoices age over ninety days, a factoring company will no longer finance any of the invoices from that customer. If you have too much accounts receivable concentration in a single account debtor and they lag in timely payments it not only creates a huge drag on working capital, it can jeopardize the invoice factoring relationship. Use the factoring company as a resource to stop this abuse. Tightening up payments can be handled intelligently and responsibly, but a factoring company can be an arms length advocate to a better understanding between its clients and their customers.

This entry was posted on Friday, January 23rd, 2009 at 5:36 pm and is filed under Debt Financing Awareness, Factoring Information, Factoring Process. You can follow responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.