The factoring service can be very poor

Factoring companies will usually stress the professional approach to sales ledger management and credit control that they offer but unfortunately all too often the reality is very different with some factoring companies doing little more than sending out computerized letters. Others will just contact the major customers and if the smaller debtors don’t pay they will charge their client a re-factoring fee when the account becomes 90 or 120 days old so they win all ends up.

Staff costs are a major overhead to factoring companies and many will try and improve their own profitability by ensuring that their client managers, accounts staff and credit controllers have far too many clients to look after to be able to offer a proper service.

It’s a short sighted view as many dissatisfied clients will merely transfer to another factoring company in the hope that the next one will be more efficient

factoring costs are affected by the poor service

Companies signing up to factoring will obviously want to know what it is going to cost them but all too often the actual cost of factoring at the end of the year will bear little relationship to the original forecast.

Interest is payable on the monies that the factoring company have advanced prior to being repaid by the customer and it’s a horrifying thought that if the factor’s service is so poor that customers who were paying on average in 60 days were allowed to slip to 75 days the interest costs would end up 25% higher than forecast.