 |
|
If your company is under financial pressure, you’re not the only one - find out what is happening elsewhere to companies like yours.
Click here to find out more |
|
|
|
|
Owed money by a company and have all the information available? This form is a quick and easy way to get started on the road to recovery.
Click here to find out more |
|
|
|
 |
    |
 |
With this in mind we have listed a number of available options for you to consider.
We believe our services compare very well to the alternatives, without any selective sales spiel. We want people to be comfortable that, once they have selected Fluid Finance, they have made the best decision for their business
Factoring
Factoring means you are advanced typically 85% of the money by the factoring company who then collect your debts into one of their bank accounts to pay this “loan” back.
Benefits:
You get money instantly, as soon as the invoices are raised and sent. There is also no overhead cost or salary of a full time member of staff
Drawbacks:
All your clients know you are factoring and the stigma associated with that. Your clients are chased by credit controllers, employed by the factoring company, who will be unable to sort queries or take legal action if required. The credit controllers will not have met you or know your business and therefore won’t take into account your relationships with your clients. Would you really be happy with someone you didn’t know phoning your clients?
If the debts go over 90 days the factoring company take back the money they lent you which, because the credit controllers are doing a very basic job, is quite common. You are then left with old debts that are harder to collect and a confused client when you have someone new chase them. There can also be qualification criteria that your company may not meet (i.e. signed delivery notes etc), this can be difficult for service companies to comply with. Finally because you are effectively “borrowing” the money there is an annual charge that can be expensive because it’s calculated on how much you are borrowing and for how long (like interest). The amount you pay is really dependent on how good their credit controllers are. The longer the debt is outstanding and you’ve got their money; the more you are charged.
Invoice Discounting
Essentially this is the same as factoring but run by your bank. Money is received into a different account from your current account but still in your name and you chase your own debts
Benefits:
You get money instantly, as soon as the invoices are raised and sent. Again there are no overhead costs of paying a full time member of staff.
Drawbacks:
The main one is increased administration. The bank will install software and train you but it is time consuming. Cheques you pay in take 5 days to clear into your borrowing facility (which means 2 days of extra interest for the bank and 2 days more of them charging you interest for the borrowing). You are also still doing your own credit control, so if you didn’t have time in the first place this will make it worse as you now have increased admin as well! Furthermore you still need to pay a solicitor to take things further if that becomes necessary. As with factoring, once the debts are over 90 days the money you borrowed will be taken back. This can cause problems as money you thought you had disappears from your account. Again there is “qualification criteria” that your company may not meet. It’s quite rigorous and may lead to some debts being exempt (i.e. overseas debts) or additional admin being required (signed delivery notes etc). This is often not practical for advertising or service based businesses. Finally it is expensive. There is a set up fee, a monthly fee and then interest on all the money you borrow. This is not a cheap option!
Solicitors
Some solicitors offer a no win – no fee service for ad hoc debts that you find hard to collect
Benefits:
You have access to a full legal team to go into court if this is necessary and, as long as you have negotiated a “no win – no fee” contract, you only pay if the debt is collected.
Drawbacks:
It’s slow. Solicitors rely on letters and a strict system of collection. Depending on the solicitor’s method of issuing court summons, sometimes it can take 2-3 months to get to court and in some cases the debtor has moved or gone bust by then. Although you don’t have to pay the solicitor fees you do still have to pay the court fees and disembursements even if the debt is not collected. Always check that you are not going to be charged for court appearances, court fees or expenses even if the preparatory work is free.
Doing it yourself
This means that someone in your organisation chases money, often in addition to another role. This works if the person has time, but dedicated credit controllers are always more efficient as they have nothing else to distract them.
Benefits:
There are no additional overheads as the person is already employed by you, or is you! Debts are chased by someone who knows your company, how it works and its relationships with the clients.
Drawbacks:
The person chasing will very likely be distracted by other parts of their job and therefore unable to pursue payment efficiently. Similarly the credit control activity is often a distraction from the person’s main role, for example, aren’t salespeople better selling than collecting money? Inherently these people aren’t trained to credit control and probably don’t like asking for money. It’s hard to swap roles if one week you are chasing money and the next week trying to sell to the person again. The relationships are different and can become confused. After all this, you will still need a solicitor to take things further if the person continues not to pay and spend even more time briefing them on the history of the account.
Employing a Full Time Credit Controller
Obviously this is the best answer but lots of companies can’t afford this luxury. However, even if you can, the person will still need to be trained and managed and can settle into doing ‘an okay’ job, since they are getting paid anyway.
Benefits:
Your debts are collected by someone within your company that knows the business. The person will also be fully committed to debt collection without any other distractions.
Drawbacks:
Increased overhead cost including salary, NI, benefits, training and higher phone bills Also what do you do with an “okay” credit controller, someone who does the bare minimum? Finally, and as with previous options, you still need a solicitor to take things further.
If having considered the alternatives you are interested in discussing how we can help you, please feel free to contact us when we will be happy to hear
from you.
Back to Top
|
|
