Monday, January 08, 2007

Factoring Question 8

Is it necessary for our customers to know that our invoice to them have been factored? Does it affect our business credibility with them?

Yes it is necessary for your customers to know that your invoices to them have been factored. This is because there has been a legal assignment of them in favour of the Factoring company. Your customers are legally bound to now pay the full face value of the invoice to the factoring company. That’s why they require notice.

Further, Factoring companies have a duty to notify your customers and a duty to verify that the invoices relating to that customer are genuine.

Factoring companies are very sensitive when it comes to dealing with your business customers. This is because they have taken over the management of your Receivables. This involves tracking how quickly they are paid by your customers and very often allowing you to see it online in real time.

Factoring companies are fully aware of the relationship between a business and its customers. It’s not in their interests to sabotage it. Many Factoring companies will discuss this with you and customize their approach to your customers.

Don’t forget: the fact that a third party is funding your Receivables, is an important signal to your customers that your business is regarded as being in a good financial position and poised for future growth.

© 2007 Sanjeev Aaron Williams & Cashwerks All Rights Reserved

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