A lesser known fact is that you can increase your business profits with factoring. Given are some ways you can do this minus the associated hassles:
Collect your Account Receivable Invoices
Ensure that you collect your overdue invoices and file them properly. You should also calculate the total amount of overdue invoices. Write down the number or make a mental note of it. Compare this number with your annual profits and calculate the percentage of increase your business will earn if the accounts are collected.
Contact a Factoring Company
Contact a factoring firm and find out about the services offered. Check in the business directories or yellow pages to find out the contact details of factoring services. You can also check their website and browse through the services offered. Similarly, you can also find out the amount they charge to factor the invoices via the website. Generally it is around 1.5 percent or more.
Open a Factoring Account
Open a new factoring account with your representative. You will have to fill out the application form and submit personal details as well. The firm should provide you with a detailed contract containing all the details. Read the contract carefully and sign it. Remember that the firm will check or assess your credit details before proceeding with the process.
Submit your account receivables invoice
You should then submit your account receivables invoices to the factoring firm. They will pay you around 80 to 90 percent of the total value of the invoices you submit. The factoring firm will then collect the overdue accounts. Your customers will however see a new payment address on their bills. The firms, collecting the invoice, will pay the remaining 20 percent, minus any associated fee.
Add the ‘Income’ Amount
You should then add the income amount you received to the overall profits given in the budget report. Calculate the percentage of increase it caused in your overall profits.