What Impact Will Invoice Factoring Have on Your Customers?

Updated: Sep 14

Selling your account receivables to an invoice factoring company is becoming common and less concerning to many businesses. The stringent requirements of the traditional banking system have restricted a lot of small and seasonal businesses from qualifying for funds they need. That is why invoice factoring or account receivables have become the go-to financial solution for small to midsized companies. Businesses use invoice factoring in different developmental phases to support working capital requirements.

When businesses decide to opt for invoice factoring to fulfill cash-flow needs, communicating this to the customers is one of the most important things. It is because customers receive a notice assignment from invoice factoring companies indicating that certain business (the one they have partnered) has turned their invoice collection to factors. That is what makes informing customers a mandatory step to address before a customer receives an assignment notification. Also, communicating this to the customers ensures that all their questions and queries are answered. In general, businesses must know how invoice factoring can impact their customers and thankfully Porter Capital is here to explain exactly how that happens.

How Invoice Factoring Impacts the Customers and Business?

As mentioned earlier, invoice factoring is an easy and excellent way for businesses to improve their cash-flow. It also provides a slew of benefits to the customers. A professional invoice factoring company improves the working relationship of businesses and customers’ payable departments. Account payable professionals who are experienced and trained are often familiar with factoring rules and like working with management of factoring companies. Porter Capital, in this regard, is one of the reputable factoring firms that help businesses strengthen their relationship with their customers.

It carefully serves customers and helps businesses manage customers’ perceptions. It is a professional factoring company that understands the significance of customers and put great efforts into sustaining and maintaining positive relationships. That is to say, well-mannered and professional communication with the customers matters a lot when it comes to factoring invoices. It is one of the hallmarks of renowned invoice factoring companies that their best interest is to deliver a high level of service and expertise not only to the businesses but also to their customers.

How does Choosing the Right Factoring Company Benefit Customers?

As we said, the benefits of factoring invoices apply to businesses and customers. If the customers of any business are large companies and corporations, they understand how factoring companies can benefit them. Giant corporations have tons of working experience with factoring companies, and they know that these firms are well-versed in managing the account receivable process. The intimate knowledge and experience in the factoring process are extremely helpful in making the customers ‘job easy-to-manage. The companies can maintain a flow of invoice documentation, resolve disputes, and clarify the pertinent information.

That is why choosing the right factoring company is vital to maximizing the financial benefit but also to have a positive impact on the customers. The unprofessional factoring companies are rather overly aggressive when it comes to putting efforts for collection. They do not understand the complexities of a certain industry business works in. Plus, only a few factoring companies are capable of handling collections efficiently with discretion.

Invoice Factoring Misconceptions that Impact Customer Relationship

Many startups and small businesses are discredited by their customers when they come to know about their partnership with the factoring company. The customers tend to avoid doing business with the startups or part ways upon finding of invoice factoring. Take a look at these misconceptions associated with invoice factoring that may impact the customer relationship.

  1. The Health of the Business is Not Good if it Factors Invoices: One of the topmost concerns of the customers (mostly small corporations) is that businesses that use invoice factoring are not financially stable. If your customers are large companies, you might not face this issue as they understand the rationale behind using invoice factoring companies. The new customers and small companies, on the other hand, see invoice factoring as your business is looking for a savior or lifeline.

  2. You have Lost Control of your Business: The priority of the customers is to determine how factoring invoices will impact the product and service quality they receive. As invoice factoring company collects your invoices on your behalf, clients who do not have an understanding of the factoring process view it as you have lost control of the business.

  3. Customers may Consider Invoice Factoring Companies as Debt Collector: This is another common misconception many customers have about the businesses that choose invoice factoring. They consider factoring firms as money collectors who may harass them if payments are not made timely. Educating clients, in this regard, is extremely important to help them change their perception of factoring companies.

Can you Manage Working Process with a Factoring Firm?

There is no denying that the customer should be the topmost priority of any business. Choosing a factoring company with great care is the first step you can take to satisfy and retain your customers. This is only possible when you put efforts to determine whether your chosen factoring company is reliable and has extensive experience in the relevant field. How does it handle customers’ commendations and complaints? Does it have ethical practices? Does it values align with your business. Showing your diligence is very important before making any decision.

The other way to manage the working process with a factoring company is to keep your customers in the loop about factoring invoices. Keep them informed about what is going on in the business. If possible, explain to your customers the reason behind choosing invoice factoring. Explaining your decision to them is the easiest way to win their trust and maintain a relationship of trust. Plus, make sure you do this before your customers receive assignment notice from the factoring company.

Final Thoughts

To crown it all, switching for invoice factoring is no doubt a vital decision that may impact your relationship with your potential customer if you do not inform them about the changes in the business. Thus, to sustain in a long-term relationship, communicating impending changes in your business to customers is the most important step. If your business needs working capital and has outstanding invoices (or accounts receivable) Porter Capital can get you funded in just a few days; to start the easy and simple process just fill out the form below and one of our business development officers will be in touch.

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2112 1st Ave. N.

Birmingham, AL 35203