• Online Factoring Calculator To Work Out Cost Savings

    We have an online factoring calculator, which is an Exel spreadsheet, that allows you to work out the cost savings of using factoring over handling your own functions, such as credit control.

    Online Factoring Calculator

    The online factoring calculator allows you to quantify cost savings in the following way. You enter the cost of your factoring facility. This will be the service charge and discount charge. The calculator requires some further information such as the turnover of your business, number of invoices, number of debtors etc. The information that you are required to enter is highlighted by the yellow boxes. You can then enter further values associated with the cost of handling your own credit control, such as wages and associated costs.

    You can also enter details of any early payment discounts that you will receive from suppliers by having improved cash flow due to the use of factoring, which releases cash into your business. This means that you can potentially pay suppliers quicker and negotiate such early settlement discounts.

    The spreadsheet works out the cost of the factoring facility by calculating the service charge and discount charge. It will then calculate the cost of your existing credit control function by adding together expenditure such as the employment costs of your credit controllers and the variable costs of functions such as sending out statements and chasing letters. These costs are added up to identify the savings that could be made by using factoring, including the benefit of any supplier discounts as mentioned above.

    The spreadsheet then compares the cost of factoring with the savings that you can potentially make, and identifies either a net saving overall, or a net cost. In the example that is shown in the spreadsheet, you’ll see that there is a significant saving to be made of approximately £11,000 per annum.

    The calculations do not take into account other potential saving such as office space, HR time and training of credit control staff.

    Credit Control

    If you are still intent on running your own in-house credit control function, please see our credit control guide for details on how to operate your own invoice collections. If you would like to understand the overall cost benefits of factoring to your business, please contact us and we will be more than happy to go through this kind of calculation with you.

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