Common Invoice Factoring Mistakes You Must Avoid
Invoice factoring is one of the simple and easy ways for SMEs to get funding when they are on the verge of a cash crunch. However, there are some common mistakes SMEs make when it comes to invoices, invoice factoring and keeping a good relationship with the factoring companies.
We are going to list down some of these common mistakes so that you can avoid them at an early stage.
Invoice factoring is a financial service that you can utilize to receive immediate funding in exchange for your invoices. However, Invoice factoring doesn’t suit every industry vertical, you can read here about some examples of industries and their situations where Invoice factoring can be of help.
Even before thinking about invoice factoring, it is necessary to have your invoices prepared and organized. There are mistakes some SMEs make even at invoicing their customers.
Mistakes To Avoid While Invoicing Your Customer
- Make sure you send an invoice to your customer.
- Make sure you’re invoicing the correct customer.
- Make sure you have filled in the correct details ( company name, invoice amount, etc.)
Once you have invoiced your customer, it is necessary to keep those accounts receivable organized. Online accounting software like Quickbooks and Xero can help you with organizing your financial records. This can also help you while applying for invoice factoring. You can read more about the benefits of invoice factoring companies and how to apply right here.
Mistakes To Avoid While Choosing A Factoring Company
Factoring companies work with different terms and conditions which you must consider before choosing one. It is important to go for the factoring company that fulfills your requirements and gives you maximum value.
- Make sure the company you work with doesn’t demand a minimum monthly fee.
- Make sure the factoring company has no hidden fees.
- Inquire about the upfront payment percentage and make sure it meets your needs.
Misinterpretation of fee and other service charges can make a sore experience with invoice factoring, thus, make sure you are consulting with the concerned person from the company. Not reading the contract terms and conditions can also cause a lot of trouble in a later stage.
Overall, reasonable factoring companies have a smooth workflow and are easy to work with.
Mistakes To Avoid For A Healthy Relationship With The Factoring Company
While working with a factoring company, make sure you are keeping a healthy relationship with the company. Keep the following in mind to have a trustworthy relationship with the factoring company.
- Don’t submit invoices for work/service that is not delivered.
- Don’t misdirect payments from customers
- Don’t provide inaccurate information
- Don’t submit contracts or purchase orders instead of invoices
When you are factoring your invoices, typically the factoring company handles the collection end of invoices from your customers. It is important to keep a good relationship with your customers too. Make sure that they are informed about the collection end process. You can either let them know about your decision to choose a factoring company or you have arranged another firm to look after the collection end.
Invoice factoring can be a great option and it is one of the most preferred ways of funding for SMEs as per the past surveys. But, it is necessary to choose a correct factoring company that helps you grow your business by meeting your requirements.
Finaxar offers secure and high-value factoring services in Singapore. The online application procedure only requires integration of your accounting software and you will get your application approved within 72 hours. Once approved, you can receive up to 80% cash in advance from your unpaid invoices and remaining 20% (minus fee) when your customer pays us. There is no other “hidden fee” in the entire process.
Turn your outstanding invoices into cash faster than ever with Finaxar. Do consult our executives to understand how we can help you with our financial services, and thereby making your business stable and scale.