Q: How involved will you be in collecting on my invoices?
A: Collections are a very important part of running any business, however, many small business owners simply do not have the time or resources to put into it. When factoring your invoices, you also get a partner in helping with invoice collections. A factor will do “soft collections” to assist with collecting based on your payment terms. This is usually a friendly email or phone call to your client just to make sure that they have everything they need to make payment on your invoice.
Factored Invoice #301 for Susie’s Bait Shop is $1000 and NET 30
Today the invoice is 37 days old. Your account manager (at the factoring company) will email AP at Susie’s Bait Shop and ask if they have the invoice in their system and when payment is expected.
Two days pass and no one from Susie’s has return the email. Your account manager may call Susie’s and ask for AP. They will mention the invoice is past due and was re-submitted for payment this week.
Your account manager will continue to follow-up periodically. If no response is received and the invoice becomes 50 days outstanding, your account manager will reach out to you and ask for help. Maybe a physical visit needs to be done. This example shows how you can work together with your account manager to get your invoices paid in a timely manner.
Remember, your factor wants your relationship with your client to stay strong so keeping collections friendly and professional will be top priority. If your factor is not getting any response and an invoice remains unpaid, they will likely ask for your help in collecting. Having a factor will help improve cash flow but also provide “back-office support” that can be a benefit to many small businesses.