Use factoring to beat the credit crunch

25/07/2008

As new figures show that business failures are on the rise, protecting cashflow must be a priority for businesses.

Information group Experian showed in June that business failures have risen 17.5% for the first half of 2008 compared with 2007. Failures of businesses related to property are showing the most dramatic increase, at a staggering 81%. Banking and financial services business failures are up by 58%.

So how should a business protect its cashflow? Invoice discounting and factoring are both solutions worth considering. A reputable factoring or invoice discounting company will pay you up to 90% of the value of your outstanding invoices straightaway. Fees and interest charges apply of course, but it's an option worth considering if it can save a business from having to wait many months for customers to pay invoices - especially if customers are themselves struggling.

Businesses should always keep alert for any indication of customers facing financial problems. If a customer isn't able to pay, they may evade contact, by not answering correspondence or taking phone calls. If a previously prompt payer starts delaying what they owe, it's likely trouble is brewing.

Businesses that use factoring companies do not need to chase customers for payment, as it's part of the service provided.