Factoring to become crucial during recession, says expert

15/01/2009

A legal expert has urged businesses in Yorkshire to revamp their invoicing procedures in order to survive the recession.

Azher Quvoom is a solicitor in the Corporate Recovery Department at Dickinson Dees LLP in York. Writing in The Press, Quvoom advises firms to "think about invoice factoring, an increasingly popular form of funding for small to medium sized businesses."

The key benefit of factoring is the way it eases cash flow - and this is all-important in times of economic strife. In fact, according to Quvoom, cash flow should take priority over profitability in the short term.

The other crucial element of surviving the recession, believes Quvoom, is credit control: "Focus on debt collection to convert your work in progress into income. Bill early and bill often. Set up automatic late payment reminders and enforce credit terms vigorously ... Discontinue with clients who don’t pay or offer poor excuses for late payment."

Easing cash flow with factoring and tight credit control should be counter-balanced with supply term negotiations. Businesses should try to get lengthy credit terms from their suppliers in order to maximise working capital.