I worked as a Finance Manager for a number of years. Over that time I oversaw a number of complex collections groups and at times we outsourced our collections to factoring companies.
There is a right time and a wrong time for a company to factor their invoices through a Factoring Service. The decision should not be made lightly but can be advantageous both for your company’s bottom line but also for the credit of your customers. Factoring invoices and outsourcing the collection on those invoices to a company specializing in those services can save you time and money and overhead. Your invoices are not something that can just be handed off and forgotten about soon after. It takes a good amount of time to properly plan the transition and plan the management of the new relationship with your future factoring partner. Any company that does their homework in these two areas, can definitely save money, save overhead, offer their customers lower prices and help their customers build out better credit. Factoring prices are reasonable and can be comparative to the costs that many companies reserve for bad debt and pay for inhouse collections. However, if a company attempts to hand over the invoices and ignore the partnership no savings will be found. To put it a different way, you do not want to outsource a broken inhouse process. Fix your culture and your process first, and then factoring can be a useful service.
Note. For anyone considering factoring services, I have offered my consulting services in this area since 2005.