Invoice financing has come with a lot of benefits to improve running and daily management of businesses around us. With the state of competition around every business entity, maintaining customers is crucial and in the process you won’t avoid getting into debts. The debts when not taken care of can damage your business than do good to it. You fall behind plans because you got no cash at hand yet you have initiated sales. That is why you need the invoice financing companies to keep check before your business goes bankrupt. However, there are disadvantages involved when you opt for this services and incorporate them to be part of your operations.
Customers treatment; the invoice financing company may not treat your business customers to your wishes as they go to chase for the payments to be settled. It is every entrepreneur wish to serve their clients better and wants them to come back next time accompanied by more customers. This is because customer satisfaction and word of mouth play a vital role in advertising and marketing. This is a non-issue to factoring companies they want only the payments owed at that particular moment. Your relationship with the client is of no value to them as long as they recover their money. You are likely to lose unsatisfied customers who may feel harassed or mistreated in the process. You may lose the control of how much credit you offer since this initiative is taken over by the invoice financing company. All these protocols are beyond customer’s knowledge, and they will just walk away feeling you just denied them.
Quitting this arrangement; it involves getting into long contracts that coming out is a long process in itself. The reliance on this cash flow mechanism can be hard to get out from and try another mechanism. This is because you not the only one in charge of operations as the factoring partners play a vital role in the day to day management. They will often visit for audits and site visits which will disrupt your operations on a given day as you have to attend to them. Since they got your debt books, it makes it impossible to seek funding from other sources when in need because that is security you could have used. Whether the company uses non-recourse or recourse factoring, if not keenly done, you may plunge into bad debts within a short period.
As you go out seeking for a factoring company, keep this two perspective in mind and try establishing ways of overcoming these obstacles. Seek advice from those already using invoice financing agents to get the real picture on the ground.