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How to Avoid Problems When Invoice Factoring:

When your business needs funding to support small business growth, you cannot afford to run into any problems with your business financing. Invoice factoring services should make your operations easier with receivables management and collections provided. When choosing a factoring company, keep in mind your small business financing needs. What are the invoice factoring problems that your business needs to be aware of?

1. Customer’s credit

An invoice factoring company evaluates the credit worthiness of your customers. This is to protect both companies in the event of customer non-payment. Factoring companies will only advance payment for invoices from a client they know will pay. This can be seen as a negative, but do you really want to be doing business with clients that will not pay you for your goods or services? It’s in everyone’s best interest to only work with companies that will pay you. This is why a factor will evaluate your customer’s credit and payment history. It’s another layer of protection for your business.

2. Invoice verification problems

Sometimes a factoring company has challenges verifying the invoice with your client. Some deliveries go missing or arrive damaged. Verifying an invoice amount and the status of the goods or services performed ensures that there are no disputes in client payment. If your shipment arrives damaged or your services are unsatisfactory, the invoice verification process will shed light on the issue. This enables your company to correct the problem and preserve your business relationship with your client. Additionally, invoice verification creates clarity on the invoice amount and due date. That way, there is no misunderstanding about how much is due and when it is due. Invoice verification is a standard business practice when selling b2b on credit terms, so it takes a load off your business by outsourcing this step with your invoice factoring services

3. Incomplete orders

Incomplete orders are ineligible for invoice factoring. This invoice factoring problem goes hand in hand with invoice verification. You want to be sure, as a business owner, that you are fulfilling your promises to your clients. If something goes wrong, it’s a benefit to your company to know about it and be able to correct the mistake. Hold yourself accountable when delivering to your clients as incomplete orders cannot be eligible for payment until the order is met.

4. Customer does not want to pay a factor

This is a common concern raised by companies that want to factor their invoices. Business factoring services include multiple methods for your customers to pay the factoring company. They can pay online, by credit card, wire, ACH, or even a bank lockbox. We work with companies across every industry that has no issue paying the invoice to the factoring company. With all the convenient and secure ways to pay, often it makes invoice payment simpler for your customer. In addition, our polite and professional staff ensures business relationships are strengthened through any contact we have with your customer.

5. Poor record keeping

Some companies worry that poor record keeping can create an invoice factoring problem. In fact, invoice factoring services for small businesses is a simpler solution than a bank loan or online loan. The financial requirements are basic, and a business invoice factoring company needs less paperwork than other lenders. The goods and services are already performed, so we only need the invoice to be able to fund your business. As a free addition to your factoring services, Eagle Business Credit manages your receivables and offers a 24/7 online dashboard available for you to monitor the status of your accounts.

accounting software flow chart

6. Not understanding the contract

When signing any lending agreement, it is beyond important to understand the contract. Some alternative lenders have developed a reputation of hiding fees within the contract, catching business owners by surprise and raising their overall cost of business funding. When drafting the individual terms of your factoring agreement, be sure to understand what hidden costs and fees might arise. Read your contract carefully and discuss your concerns with the factor. Anything in the contract that you did not initially agree to should be a red flag. It’s in poor taste to include costs that were not previously discussed.

7. Not having enough funding

Some business owners worry that an invoice factoring problem is insufficient funding. Merchant cash advances that offer lump sums seem appealing for the amount of cash you receive immediately. Unfortunately, these MCA agreements can ruin your cash flow. Daily or weekly withdrawals will challenge your ability to make supplier payments, cover overhead, or even meet payroll. Invoice factoring is a small business financing solution that grows with your cash flow needs. The more sales you make enable more credit for your account. If you find that you need even more financing to support your growth, PO Funding or Purchase Order Financing can be added to your factoring services to cover the cost of materials and supplies. PO Financing enables your business to take on larger volumes of orders by providing the upfront costs of doing business.

Invoice Factoring Problems:

There are not many invoice factoring problems that cannot be solved by talking to your factoring company. When searching for an invoice factoring company to improve your cash flow, be sure to talk to decision-makers at the factoring company. If you are unable to ever speak to someone that has direct control over decisions with your business funding, this is an invoice factoring problem. Partner with a factoring company in Georgia that communicates clearly and fairly with your business. This will make it unlikely you ever run into an invoice factoring problems.

infographic of invoice factoring problems like customer credit, verification problems, incomplete orders, customer non-payment, poor record keeping, not understanding contracts, and insufficient funding