Working with a professional, experienced accounts receivable factor is a positive experience for any business. It allows for more effective cash flow management and provides funds to address gaps in time and income between billing and payment from customers on 30, 60 or 90-day terms.
Finding the best match between a factor and a business starts with the business owner finding out about the factor. This article will provide a short list of possible factoring companies to interview, allowing the business to pick the right one.
Risk Management Experience
The heart of being a successful factor is in being able to effectively assess and manage risk. Always check to make sure that the factor you are considering is an established and experienced company in the industry.
Additionally, look at the portfolios or resumes of the management team and assess the experience of those professionals. Avoid companies that provide only vague information or have only a few years in the business.
Your Needs
Every company will have different needs with regards to the volume or total monthly amount they need to factor. For a smaller company with limited total monthly invoice volumes, ensuring the accounts receivable factor doesn’t have a monthly or quarterly volume requirement is essential.
You will also want to choose a factor that works with businesses with your volume of invoices. By choosing a company that can cater to your specific needs, you will have competitive fees, excellent service and a factor that understands your business. This also includes the factor having experience in the specific industry.
Commitment Requirements
Just as some of the accounts receivable factor services require a monthly or quarterly volume to avoid penalties, others require a commitment to their service in the form of a contract. This can be for six months to a year with large penalties for breaking the contract.
Just remember to always verify information about the factor and have a good understanding of your needs before making a final choice.
