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Factoring: a solution for B2B bad payers?

Factoring: a solution for B2B bad payers?

Temps de lecture : 4 minutes

It's every B2B company's worst nightmare: late payment. Invoices paid after the due date, or even unpaid, are commonplace in this sector. For many companies, factoring is an effective way of anticipating potential cash flow problems.

What is factoring?

Also known as factoring Factoring is a financial management technique in which a company calls on a specialized organization to look after its cash flow. The financial institution in question, nicknamed factor is responsible for all billing-related matters: handling overdue payments, monitoring payments, terminating reminders and collections...

Note that there are several types of factoring, each with its own specific features:

  • conventional factoring : the company sells its receivables directly to factor which immediately pays the corresponding amount.

  • semi-confidential factoring : here, the factor only handles cash management, not debt collection.

  • one-off factoring : in this case, the factoring contract does not cover all the receivables, but rather a few of them, on an irregular basis. In general, it's a case-by-case basis.

  • le reverse factoring : more rare, reverse factoring is initiated by the debtor, who applies to the factor to settle its claims against the company.

  • import and export factoring: These two types of factoring are designed for B2B companies working with international customers.

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How does factoring work?

In practical terms, when a company signs a factoring contract with a financial institution, this means that it assigns all its receivables to the institution. Visit process is as follows:

  1. A B2B company creates an invoice for a customer,

  2. It calls on a factor and signs a factoring contract,

  3. It "sells" the invoice to the specialized organization,

  4. On receipt of the document, the factoring company pays the company 90% of the amount of the receivables, including VAT. The remaining 10% is earmarked for the guarantee fund and management fees, and is paid to the company when its customers have paid their invoices by the due date. factor .

  5. In the event of non-payment or late payment, the factor will be responsible for collecting the invoice, since it now owns the receivable.

An effective tool to prevent late payment and non-payment

In the B2B sector, where transactions between companies are often delayed, factoring is the ideal solution for better cash management. In fact, this technique offers a number of advantages:

  • improve cash flow : when the company sells its invoices to factor This provides immediate cash flow and increases working capital. This is a necessary maneuver to prevent late payments from destabilizing cash flow and threatening the very operation of the company. In other words, you'll be able to collect on your trade receivables without waiting for the payment due date.

  • control credit : the factoring contract includes the collection of receivables from your customers by the financial institution in the event of late or unpaid invoices. This is a real time-saver for your teams, who can now concentrate on the company's core activities.

  • improve working capital : Gone are the days when you had to wait 30, 60 or even 90 days for your invoices to be paid! With factoring, you get immediate cash flow, making it easier to achieve your business objectives.

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Écrit par

Valentin Orru

Head of growth