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5 Mistakes that Invoice Funding Company Clients Should Avoid

Triumph

October 31, 2018

Invoice factoring can go by many names: invoice financing, invoice funding and accounts receivable financing. Different names, but they all help small businesses receive the funds they need without waiting 30, 60 or 90 days to get paid from their customer.

In many cases, invoice factoring services can provide funding in as little as 24-48 hours. Thousands of businesses turn to invoice factoring companies, in large part, because of how easy it is to apply and get approved. But that doesn’t mean that a small business owner should just choose the first factoring company that pops up on a Google search. While most factoring companies offer the same basic service, there can be significant differences in the terms and cost. It’s important to avoid pitfalls that can leave you in a long-term, expensive contract.

Here are the most common mistakes your business should avoid when selecting and working with an invoice factoring company.

1. Not staying organized from the start

It’s important to submit error-free, easy-to-read paperwork. To do that, you have to stay organized. Include every expense as well as an explanation of each charge in your invoices, and proofread everything before sending the documents off. Sending duplicate invoices, sending them to the wrong place or department, or not sending them at all can quickly lead to larger problems down the road, such as becoming unqualified in the application process.

Businesses become, well, busy, so you don’t want to trust yourself to send an invoice later. All too often, waiting leads to forgetting. Keeping track of which documents you need to send and where they should go will save you a headache. Plus, it saves time for both you and the invoice factoring company. Don’t waste time by neglecting applications or filling them out haphazardly. Simply be sure you submit clear paperwork to avoid extra work or additional charges. Here’s a good rule of thumb: send invoices the moment you complete or deliver a project.

Your invoice factoring company will also work with you and provide you resources to help you submit clear and easy-to-read documentation. Remember — if your invoice factoring company can’t read your invoice, it can’t be processed, and you won’t get paid until the paperwork issue is resolved.

2. Failing to familiarize yourself with the factoring company

Borrowers should understand exactly what they’ve agreed to with their factors. What’s the contract length? What does the fine print say? Are there any additional fees your business should know about?

Beware of glossing over any of this information. You should thoroughly read your contract. It might look confusing if you’re not familiar with formal industry terms, but you need to make sure the proposal and the agreement match. You’re still going to be held responsible for everything in the agreement, whether you understand its terms or not. While a commercial factoring company should generally avoid ambiguous language, they should also be happy to explain their policies if you have any questions.

3. Withholding important information

Invoice factoring is a popular choice for businesses because of how quickly you can get signed up and approved. But the best way to guarantee a fast response is to be thorough and honest on your application. If you’re in a hurry, it’s easy to leave sections of your application blank or, worse, submit misinformation.

From the start, factoring companies need to assess your business. In order for them to provide you with the best possible quote, you need to provide them with a complete, detailed application. Failing to include information on your application can delay approval or it can be denied all together.

Be upfront about any previous bankruptcies or tax liens. They won’t automatically disqualify you, but they will come up on a routine credit check, so save time by letting the factoring company know what to expect.

4. Not using technology to speed up the process

Most factoring companies don’t require the original documents to issue payment. That means that your mobile device is probably one of the most important tools you have in getting funded quickly. If you’re away from your desk or on the road, you can easily snap photos of your documents and email them or load them to your factoring company’s client portal. This can help cut down on the delay between submission and funding.

Be sure to ask your factoring company what other technological resources they have to help you better manage your fundings and overall finances. Many provide reporting tools and other alerts and notifications that provide real-time status updates on your paperwork and payments.

5. Limiting your earning potential

Like most businesses, invoice factoring companies benefit from client referrals, and many will even compensate you for them. So just by submitting client referrals, you can gain some extra cash when a new client is funded.

The payment structure and schedule depend on the volume of business you’re referring, so ask your factoring company what type of programs they have for client referrals. With client referrals, you can boost your bottom line, while using invoice factoring to meet your monthly expenses.

Invoice factoring helps you build financial health

While invoice financing can help boost your cash flow, it’s important to remember that it’s one part of a coordinated strategy to maintain your business operations.

Working with an experienced company ensures that the invoice factoring process goes smoothly. Founded in 2004, Triumph Business Capital can help your business manage its capital. Over the years, our invoice funding company has helped over 7,000 small and mid-size businesses with their financial needs.

Freight, trucking, oil and gas, and business factoring services are simply a few of our offerings. If you need to remedy your business’ cash flow issues, we make the process easy. Our team can help you get the cash advances you need on your invoices. Choose us as your commercial factoring company—call today at 866-368-2482, and let us be your partner.