Factoring is a type of business finance that provides an alternative to traditional bank loans and overdrafts. Despite local businesses factoring over R25 billion in turnover each year, some South African companies are still unfamiliar with this funding strategy, designed to provide growing businesses with fast access to working capital.
Many companies offer their customers products or services on credit. This means that these businesses must wait for 30, 60, 90 or even 120 days before receiving the funds that are payable on invoices due. This can have a significant impact on cash flow and almost always restricts business growth.
How factoring keeps companies in business
Factoring is a solution provided by various financial services providers, including banks and independent factoring companies, that enables an organisation to draw cash back into the business before the customer pays.
When partnering with Merchant Factors, a totally independent finance house founded in 1988, up to 75% of the value of an invoice can be paid on presentation of the POD, with the balance being paid as soon as the customer settles the account in full.
Back office support: the added advantage of factoring
Unlike many other financial institutions whose service extends to the provision of finance only, Merchant Factors provides much-needed support in another challenging area: the administration of the debtor’s book.
Collecting and managing payments requires a significant amount of effort and also uses valuable time that could rather be spent running the business. Add to this the headache-inducing instances where customers are difficult to reach or payments are overdue, and this process becomes an arduous one that wastes many precious working hours.
As part of its comprehensive factoring solution, Merchant Factors handles sales ledger administration on behalf of the business. This is similar to providing the company with an entire accounts and credit control department – a service that saves hours and hours of valuable business time.
- Merchant Factors’ team of trained credit control professionals handle the following processes:
- Opening of new debtors’ accounts
- Checking the completion of the credit application form
- Performing the necessary credit checks
- Assessing credit limits
- Sending reminder letters and final demands where necessary and as guided by clients
- Verifying deliveries as an after sales service
- Banking receipts and allocating payments made according to remittance advices received from debtors
- Assisting in settling of disputed accounts and liaising with attorneys when accounts are handed over
All of these services are carried out in consultation with the business. At no point does the business lose control of its debtor’s book, customer relationships or company reputation.
A completely professional service
Most companies are relieved to save the hours they would otherwise have dedicated to chasing payments/managing collections. However, some businesses may be concerned that their customers could react negatively to the prospect of dealing directly with Merchant Factors.
Merchant Factors understands that collections are an important step in the customer journey and that good customer relationships are a valuable asset. This is reflected in the professional way that Merchant Factors introduces its team and handles credit control. Their expert service not only reflects well on the business but also provides a welcome shield between the business and the delicate issue of ‘difficult’ collections.
Merchant Factors’ team of highly experienced administrative and credit control professionals quickly develop solid relationships with the business’s customers to ensure both positive customer experience and efficient collection of monies owed.
Complete transparency
Another benefit of teaming up with Merchant Factors is their 24/7 online system that provides clear, comprehensive sales and related management information. The business can monitor all aspects of its factored debtors’ details every step of the way.
About Merchant Factors
Merchant Factors was established almost 30 years ago to offer an alternative to the lengthy processes and limitations applicable to the funding that banks generally make available to their clients, including growing small and medium sized businesses. The financial solutions that Merchant Factors offer are innovative, flexible and fully focused on fostering business growth.
Since its inception, Merchant Factors has provided financial and professional support to over 2,000 organisations, enabling them to keep their businesses running smoothly and successfully.
Significantly, as the only truly independent debtor finance institution in South Africa, Merchant Factors offers businesses the shortest turnaround time in the industry from application to pay-out.
Unlock working capital and professional administrative support today. For fast, flexible finance – contact Merchant Factors.
Finance beyond the Numbers.
