How To Get Factoring For Free

This article is all about how to get a factoring service for free and we have produced a Factoring Cost Savings Calculator in Excel, for you to see how this works for yourself.

There is a cost associated with using a factoring facility but in many cases that cost can be more than paid for by the cost savings that are possible through using factoring.

Factoring does two main things for a business. It releases cash immediately against sales invoices as they are raised and it provides the business with a full credit control service to collect in outstanding sales invoices.

Possible Savings 

This creates two significant areas where a business using factoring can make savings. 

Firstly, the factoring discounting service can replace the existing credit control function within the business, saving the cost of employing credit controllers. In our example of a business with an annual turnover of £1,000,000 and 100 debtors with balances, that may be a full-time job for a credit controller within that business.

The second saving comes from the cash that is released from the unpaid invoices. The business that is using factoring can approach it's suppliers and request a supplier discount on purchases in return for more rapid payment of outstanding purchase invoices or even for making cash payments in respect of purchases. In our example, we assumed just a 5% discount on just 20% of the business' purchases, although we have come across examples of clients achieving discounts at much higher levels.

£5K to £10K Savings In Our Example

In our example, after allowing for the costs of the factoring facility, the example business still saves over £10,000 each year through using factoring. Even without any supplier discounts, the business would still have saved over £5,000 each year.

Have a look at our Factoring Cost Savings Calculator to see the details of our example and to adjust the figures to reflect your business and find out how much you could save.

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