- 09 Aug
Example of How Not Understanding Invoice Finance Can Cost Money
Much of the research that I have published recently has suggested that there is a general lack of understanding amongst businesses about invoice finance products. We have just seen the perfect example of a prospective customer not understanding how invoice finance products work which has been costing them money.
Our Invoice Finance brokerage has been in contact with a prospective customer that was using factoring (funding and a collections service) that was being provided by a major bank. The lead was lukewarm as the client said that they were interested in saving money, they were not getting a good service from the bank but they would only move for a substantial cost saving and they didn't think that any other factoring company would be able to provide that.
We put them in touch with one of our invoice finance partners who was prepared to quote for a factoring facility but as they expected the saving was not going to be that significant. The sales person at our partner company asked the prospect if they had considered invoice discounting and the client said that they had never heard of it and had no idea what it was!
Invoice discounting (funding only without a collections service) would provide them with a significant cost saving, as the invoice finance company is not providing a credit control service and hence the cost is reduced. The prospect was happy to take on the credit control function as they were already having to undertake it themselves in support of the bank factor that they were using.
This change of product has been able to provide them with a substantial cost saving which was money they were throwing away as they didn't understand the range of invoice finance products that were available.