[robbie14000]

Hi , Can anyone give me any information on factoring companies?
What they do , how much it costs, benefits,pitfalls.
Did a cherry picker job for a company and the bill came from HSBC who were the facoring comany.
Any info would be appreciated
Thanks Robbie
Clearshine Ltd

[Dean Taberner]

Hi

Pitfall is that if they pay you upfront for an invoice and you dont get paid for it then you still owe it them.

This can be pretty uncomfortable especially if youve already spent it.

Its a double kick in the teeth.

Good point is that it helps to keep the cashflow going whilst you are waiting to get paid, this can be very handy if you have to pay staff wages.

Dean

[Mr H]

Its a quick way of getting paid but they take between 10% and 25% of the invoice amount. I take it the bill to you was for the hire of the cherrypicker and so HSBC will probably have already paid the cherrypicker supplier that invoice less their commission. Its usually only used by companies who are haveing cashflow issues as it speeds up bill payments. However if for some reason you didn't pay the bill the HSBC would reclaim the FULL invoice amount from the cherrypicker company....
I.E....
Bill sent for you to HSBC on first of the month from Blogs cherrypickers for £115 inc vat
HSBC pay Blogs £86.25 on 2nd of the month and send invoice to you for payment within 28days.
Day 30 and you haven't paid HSBC so they now bill Blogs £115 for the unpaid invoice......

Its almost a win-win situation for the bank. The only downside is if Blogs went under and so did you because if just Blogs went bankrupt they would still chase you for the full amount.

Good side is fast payment of invoices so helping cash flow.
Bad side is loss of turnover due to their high commission and usually done for no less that 3months plus full payback of any invoices not paid thereby costing you more money.

Hope that explains.....

Regards
Mr H

[robbie14000]

Very informative answers.
Thanks very much guys.
We are a limited, vat registered company and find payments are very slow coming through.
Had to pay vatman over 3k this month for work that had not been paid for (45 invoices outstanding).
They do make it very difficult for companies that have employees ect.
It,s all about cashflow.
Thanks anyway , might have a look at it.
Robbie

[bluez]

Charges are a lot lower if you look around, I saw 5% quoted somewhere earlier this year I think. It might pay to use a private company instead of the banks.

[AuRavelling79]

Could you not change your vat payment to "on cash collected" instead of "on invoice"?

[robbie14000]

Malc - are you allowed to do that?
I pay my accountant a bloody fortune so surely he would have told me I can do this.
Going to give him a call after the hols to find out.
Thanks for that mate.
Robbie

[Karl Wheeler]

Hi
We pay on payments received not on what is invoiced.

[Glyn H]

its called "Cash Accounting" and you can change to it.

I got knocked by a customer  for £57,000 in 1987 and then had to pay the VAT on the full amount not recieved.
Eventually I got the VAT back when the company that knocked us went into liquidation a year later, but didnt get a penny of what was owed to us, as we were small fry they went down  owing £150 million

From that time on we have always used Cash Accounting