When considering selling accounts receivable to a factoring agent, businesses should examine factors such as experience, industry contacts, historical performance, operating style, and fee structure. Top factoring agents have a long track record of success and familiarity with the seller’s industry. Professionalism and courtesy in dealing with account holders is also important. Recommendations and referrals can provide insight into potential relationships. Commission structures, forward contract requirements, and policies regarding the return of reserve amounts should also be compared.
Cash flow problems can cause companies to explore a variety of solutions. When a business decides to sell its accounts receivable to a factoring agent to gain quick access to cash, several key factors should be considered. Firms striving to select the best factoring agents for their specific needs should examine the tangible experience, industry contacts, historical performance, operating style and fee structure of each potential service provider.
A critical attribute common to top factoring agents is a long track record marked by continued success in collecting receivables. Highly trained factoring agents will be able to accurately analyze a company’s receivables and determine if they are confident in their ability to secure payment on them. An important component of this capability is a factoring agent’s degree of familiarity with the account seller’s industry. Having an intimate understanding of the types of clients with outstanding balances goes a long way in tailoring effective collection strategies and balance sheet recoveries.
Yet another significant factor in locating the best factoring agents is the precise techniques and strategies to use when attempting to cash in seller accounts. The selected agent will inevitably come into direct contact with the sales company’s clients and therefore, the style and tone taken during the collection process is a relevant consideration. Any prospective factoring agent should have a reputation for professionalism and courtesy in dealing with account holders. Otherwise, their approach may only serve to alienate and offend customers and cause them to take their business elsewhere in the future, resulting in damage to the account seller’s business.
To gain insight into potential factoring agents, it is wise to solicit recommendations and referrals from trusted industry peers. This can help get a glimpse into how the potential relationship with the factoring agent might work, and is a useful way to determine if the seller’s needs fit well with the agent’s philosophy and structure. A simple and workable relationship between the accounts receivable seller and the factoring agent is a great predictor of success.
Last but not least, any company attempting to distinguish between different factoring agents must conduct a comparison of commission structures, forward contract requirements, and policies regarding the return of reserve amounts. Businesses must carefully balance the costs assessed by the factoring agent in bill collection with the potential benefits of quick access to funds. Neglecting to perform this basic analysis essentially makes factoring factoring fundamental.
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