Factoring Mistakes You Should Avoid

Factoring is the continuous relationship between a financial institution and a business concerned about selling products and services to customers on an open-account basis. In this case, the factor buys the client’s book debts with or without recourse to the client.

The factor provides finance for the supplier, including loans and advance payments. The period is around 90 to 150 days depending on the factoring company. It is a less costly source of income compared to other short-term borrowings.

You must follow the set guidelines to successfully use invoice factoring in British Columbia. That means avoiding some of the common and costly mistakes individuals often make. These include:

Failing to Send Invoices

Invoices are key to business factoring. It is vital to send them to your customers for the goods and services provided. It should be a priority so you do not forget. This is because you’ll not get paid if you do not send invoices.

Invoices remind your customers that they owe you money. Also, they help to keep a record of money owed to your business to track payments. Besides, customers must understand that they are being billed.

Failing to Inquire About Unpaid Invoices

Collecting payments is a tedious task. This is especially when customers take longer to pay their invoices. They can forget the payments, so it’s of the utmost importance to make inquiries so the customer can pay immediately. You should follow up on the oldest unpaid invoices first. Also, when going for factoring in British Columbia, you must inquire about how the company will handle the unpaid invoices.

Sending Invoices to the Wrong Company

Sending invoices to the wrong company can happen if you do not pay attention to the entire process and the information provided. It could negatively affect your business by exposing confidential information to unauthorized parties. It could lead to costly and time-consuming lawsuits depending on your industry. Therefore, you must ensure you send the invoices to the right company. In this case, double-checking before sending will do you a big favor. It will help your business come off as responsible and professional.

Settling for Unclear or Hidden Terms

Accepting a factoring agreement with unclear terms is a costly mistake. You might agree on terms that do not favor your venture in any way. Therefore, it’s essential to work with a factoring team that explains the terms stated in the contract. It will help you understand how the factoring firm will manage your business account receivables. Besides, the team should address your questions and concerns to ensure you know the whole process.

Not Providing Full Business Information

Factoring in British Columbia is simpler than bank financing. However, submitting incomplete and inaccurate information will lower your chances of approval. You must provide complete and factual details to maximize approval chances and avoid delaying the process.

The Bottom Line

 Customer payment delays can have an adverse impact on your business. Fortunately, factoring is an ideal way to avoid this challenge. It helps you access debt-free funds promptly to keep your business operations up and running. By avoiding the above common mistakes, you can reap the perks of factoring in British Columbia.