If you run a business of your own, there is little doubt that you will want to enhance your monthly cash flow. One of the best ways of achieving this is by invoice factoring.

Invoice factoring is a procedure by which companies sell their invoices or bills to a third party. The third party is known as a factor. The invoices are bought by the factor for approximately 3-5% less than the actual invoice. If your company generates any type of invoices then invoice factoring could be useful to you.

A factor owns your invoice once you sell it. Collecting debts from your clients is then the responsibility of the factor. Depending on the payment history of your clients, you can decide which invoices to factor.

Steps to factoring invoices

Step 1
When you send an invoice to your customer, you should inform the invoice factoring company of the invoice and the amount. This information can be sent by email, as it’s quick and easy.

Step 2
The factoring company verifies the invoice with your client. Usually, clients are not aware that the business sells the invoice to a third party. The factoring company acts like a billing department of the company.

Step 3
Once the invoice has been confirmed with the customer, the factoring invoices company will pay your business a percentage of the total amount of the bill. Usually, 70 – 85 % of money is given in advance. When your customer pays the invoice, you will receive the remaining money.

Invoice factoring is a fantastic way of keeping your business running smoothly.