If you are an exporter of goods to other countries, then at some time or the other, you must have faced a cash crunch and wished that you had ready cash in hand, instead of having to wait for your customer’s payments to arrive. Well, you now have a way of getting ready cash against your international invoices. Here’s how.

Due to heavy competition, you could have been forced to offer credit to your customers. If you have exported your goods on credit, then your local export factoring company will “buy” your receivables off you after you have dispatched the goods to your customer. They will send these receivables to an import factoring company situated in the same country as your customer, who will then do the follow up in getting your payment released on the due date. So, in international factoring, two factoring companies are normally involved.

You will get around 90% of your invoice amount immediately within a few days, which will be wired to your account by your factoring company. The balance will be transferred to your account, once your customer has released the payment on the due date. This last payment will be minus the factoring company’s charges for providing you this service, which is normally 2.5% to 4% of the total invoice value. This percentage of charges will depend on the credit period you have given to your customer, the credit rating of your customer as decided by your factoring company, and the total amount of business, value wise, which you provide to your factoring company.

These factoring companies can also take care of your collection of payments from your customers. This can be a boon for you, since you can now concentrate more on sales rather than worry about collections. The factoring company will send you regular updates of the receivable reports of your customers, enabling you to have an accurate status of your financial side of your business.

The advantages of international factoring are that your cash flow improves immediately, enabling you to pay off immediate expenses like staff salaries, bulk purchases, etc and also eliminates the need to maintain an international collection department. This facility also gives you a chance to expand your business by taking on more exports to different countries, where your factoring company has tie-ups. This facility is also convenient rather than taking a bank loan, which would normally require guarantors, collateral and intensive documentation. You would have to pay interest on that loan in any case. International factoring is more like an extension of your current business, as it takes care of your payment collection as well as provides you with ready cash.

You should note that these services of an international factoring company are slightly expensive, since two factoring companies are involved. There should also, not be any quality problems with regards the goods, which you have exported. You will also have to commit a minimum amount of business to your factoring company. Since your factoring company might take over your collections side and even take care of your bad debts, there could be some friction between you and your customers. Your factoring company might also ask for collateral from your customers as a guarantee against bad debt, which your customers might be averse to giving.

So, after studying the above points, you too can go in for international factoring of your invoices, to put your business on the fast track.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Factoring Tips

In order to lay your hands on ready cash, you can avail of the services offered by the right freight bill factoring company. The problem here is to find the right freight bill factoring company otherwise not only will you be in financial trouble but your reputation and relation with your clients could also be marred forever.

In freight bill factoring, your credit invoices, which you would have issued to your credit clients, are bought by these companies. They then transfer the invoice amount minus their invoice factoring charges into your bank account within 1 or 2 days. So, instead of waiting for 30 to 60 days for your credit payments, you could now have access to that amount almost immediately after issuing the invoice. This can improve your cash flow immediately and help you to pay off drivers’ salaries and other expenses such as fuel, servicing and repair charges on your truck fleet. This financial arrangement looks very tempting but a proper research is needed so that you do not land up with an inefficient factoring company. Here are a few things that should be taken up by you before you decide on a particular factoring company.

Cross-Check the Factoring Company. Take details of some of their existing and past clients and speak to them regarding the quality of services availed by the clients. You should also make a personal visit to the factoring company’s office and check out his setup. If he is operating from a trailer or a small, shady, rented office then avoid dealing with such a company.

The Factoring Company’s Charges Should Be Reasonable. The factoring company should charge a reasonable fee for its services. Try to zero in on a company where you do not have to sign a term contract so that you can exit the setup if you are not comfortable with them.

The Factoring Company Should Have Proper Experience. The freight bill factoring company should have prior experience in dealing with companies of your size and turnover and should also have handled clients similar to yours. They should pay you the amount promised and always on time. They should know how to handle difficult situations without aggravating them and your clients too should be comfortable handing over your payments to them.

The Factoring Company Should Be Efficient. The staff of the factoring company should be polite, tactful and efficient since they will collect your invoice amounts from your clients. They should ensure that your hard work of building up a relationship with your clients is not compromised by their rude behavior or their incompetence. They should have all the data required in their hands before they contact your clients for collection of payments.

The Factoring Company Should Be Accessible. The factoring company should be accessible to you and your clients if not on a 24/7 basis, then at least during normal working hours. They should have specific staff to handle certain clients. This staff should be well aware of the clients credit history or any other specific points related to that client. That way, any queries or problems can be nipped in the bud before it assumes dangerous proportions.

So, check out the above factors before hiring the services of any freight bill factoring company. Compromise a little on their charges but not on the quality of service, which is expected from them.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Account Receivables Collection