Bank advises factoring when trading in Europe

24/08/2008

Research by Lloyds TSB shows that a growing number of UK firms are experiencing cashflow problems when they trade with companies on the continent. Many European companies have far longer payment terms than their UK counterparts. UK companies should think seriously about using a factoring or invoice discounting service to mitigate potential cashflow problems.

Jon Adams, regional director at Lloyds TSB Commercial Finance highlights a potential pitfall: "The obvious problem, but the one that is probably most overlooked when dealing with overseas customers, is the difference between the length of time taken to pay invoices," he said.

While most UK invoices are issued with 30 days credit terms, it is common for many European companies to expect far more generous credit terms.

"Companies in France and Spain enjoy a lengthy 60 days and will have their own ideas of when this is calculated from" said Adams. "The Italians indulge in the lengthiest payment period of 90 - 120 days, and often exceed the negotiated terms."

Lloyds recommend using a factoring or invoice discounting service to cover any cashflow problems caused by European clients taking a long time to pay. "A lot of the legwork and guesswork regarding payment can also be removed by using an asset based lender that has the capability to chase outstanding invoices, whether issued to firms based in the UK or overseas" says Adams.