What can factoring mean for your organization? Read it on this informative page.
Factoring is a concept that is often mentioned in the same breath as debtor management and credit management. However, it is not always clear what factoring entails, what the benefits are and what it can mean for your organization. We would like to explain on this page what factoring entails, what a factoring company carries out and whether this form of financing can be an interesting option for your organization.
An outstanding debtor balance and a high (Days Sales Outstanding) is money (realized profit) that is tied up with the clients. The DSO gives an indication of the average length of time that invoices are paid after a product or service is delivered. A high DSO and outstanding debtor balance are often seen as a fact. With factoring, outstanding receivables are paid and the DSO and the outstanding accounts receivable balance are reduced. The factoring company keeps a close eye on the debtor portfolio with a finger on the pulse. After all, it is important for both parties that the debtor balance is closely monitored.
Factoring is a form of financing that an organization can use for a fee. The financing form ensures that the outstanding invoices are paid immediately by the factoring company. Long payment terms from debtors and waiting for your realized revenue is a thing of the past. The outstanding claims that are tied up with your debtors are paid immediately. The factoring company is responsible for the collection of these outstanding receivables. This results in financial leeway or working capital that the organization can leverage to increase its competitive advantage.
In addition, it is possible that the factoring company partially or completely takes over the debtor management. Your employees then no longer must worry about collecting outstanding receivables. They can fully focus on the new opportunities arising from factoring.
Factoring companies are the companies that provide credit and take care of debtor management. As an independent intermediary, the Credit Insurers are affiliated with various factoring companies to be able to offer the best quotation. We are not a factoring company; we are the intermediary who creates the way to the best quotation. We know exactly what to look for, so that we can find the best form of factoring for every business and organization. Some of the major parties we work with are Rabobank, ING and ABN AMRO. Have you already concluded an agreement directly with the factoring company? Then challenge us for a better offer; you always save if you conclude an agreement through an intermediary.
The financing that is provided depends on several factors, such as the amount of the outstanding debtor balance, the payment amount of the debtors and the age of the outstanding receivables. With a finger on the pulse, the organization and the factoring company have a grip on the management and an eye for growth opportunities. The size of the debtor portfolio and the scope for factoring will grow with the size of the organization.
The general benefits of factoring are listed below.
The direct payment of outstanding receivables optimizes the cash flow and creates opportunities.
Both your organization and the factoring company benefit from the growing debtor portfolio. Factoring ensures that you acquire expertise and knowledge that will help you achieve the intended goal.
Factoring grows with the organization; you do not have to apply for a new form of credit when you need more money. The debtor portfolio is continuously monitored so that any risks and limitations, as well as opportunities, are discovered at an early stage. After all, a healthy cash flow provides financial scope, allowing the form of financing to grow.
The risk of defaulters is significantly reduced.
The debtor management can be partially or completely taken off your hands. This allows you to fully focus on entrepreneurship.
The costs of factoring are determined by the form of financing that is provided. Moreover, the factors mentioned above, such as the payment behavior of the debtors and the amount of the outstanding balance, determine the costs of factoring. Rates vary between 0.1% to 1% of sales. Would you like a better insight into the costs and possibilities? Please contact us. We will gladly answer your questions.
Factoring is particularly suitable for small businesses. Small parties such as freelancers or SMEs will have to go to a bank for a loan when applying for credit. With self-employed factoring, the outstanding receivables are financed, so that the company has direct working capital to enable growth. Do you have an SME or ZZP company and are you curious about the other benefits of factoring? Or would you like to know what factoring SME and ZZP can do for you? Please contact us via the contact form.
Factoring has become extremely popular in recent years due to its many advantages. Various forms of factoring have therefore been added, so that there is the right form of factoring for every organization or company. The combination with credit insurance even ensures that risks can be covered up to 100% for only a fraction of the revenue or transaction.