• Has Factoring Been Mis-sold?

    It is curious how many businesses we speak to are focused on going down the invoice discounting route (no credit control service) rather than using factoring (which includes a credit control service) as they don't believe that outsourcing their credit control function can be translated into a financial benefit.

    In many cases these businesses have already used a factoring service from certain factoring companies within the industry where the credit control service is not a comprehensive collection service, but the product is still branded as "factoring". In these cases the factors often provide a very rudimentary credit control service mainly as a method of better controlling their risk, by verification of invoices through telephone calls to debtors.

    It does appear that this practice of labelling this type of rudimentary credit control service as factoring may be devaluing perceptions of which factoring actually is as there are factoring companies that can provide a comprehensive credit control service that replaces any in-house debt collection function that their client may have. We often come up against the incorrect assumption made by a client that all factoring companies are going to be the same. This is not the case, the differences between providers are huge.

    It seems that it would be far better to term these rudimentary credit control services as something other than factoring to clearly differentiate them from traditional factoring where the factor delivers a comprehensive credit control and debt collection service.

     

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