Balancing accounts in any company in any industry can potentially be a very difficult and trying task. An aid to ease this task is essential for many. Factoring is a process used by a lot of firms to ensure balanced accounts and that they are able to pay their temps on time, even prior to their customers paying them. This is a system many of you may be familiar with or indeed use. If you were, however, to simply weigh up your pros and cons, you may find there are other methods of advanced payment loans available to you, which could be more beneficial for your business.
Factoring is well established in many industries and can be incredibly beneficial for small firms or startups especially, providing early payment when a company may need it now. However along the way has made a little bit of a bad name for itself, and this method certainly has its drawbacks. Borrowing money allows a business to operate at its utmost, though it is likely that industries will begin to outgrow factoring and look for a more streamlined financing facility who will offer more flexibility.
New Millennia provide a unique service to help you with your payroll and funding, the differences of which we discuss in this article.
How factoring works
The client (the recruitment firm) generates an invoice for their customer, they also generate this invoice for their factor. The factor will pay a large percentage, say 80%, of this invoice to the client, giving increased freedom to their accounts. The factor will then retrieve the full amount from the customer by the invoice collection date, and only once they have paid, will the factor deliver the remaining amount to the client, in this case, 20%. This will be however less their fee. This is a widely used arrangement and is a popular way of obtaining money quickly.
How does New Millennia differ from factoring?
To gain a factor, a company needs to be eligible for credit, the same as they would to apply for a bank loan or overdraft, if this is not possible then this route is a potential non-starter.
We will not require your business to be creditworthy as we understand for a new or small business this is not always possible and will hold no debenture against your business or require a personal guarantee. By operating this way we aim to help our startups grow and give them the freedom to worry less about their cashflow.
The process of factoring can be rather involved; in the first instance, to get credit at all, and going forward, as factoring only offers a part of the return initially, followed by the final amount, minus the fees, it can mean more to keep track of in your accounts. If a simpler accounts process and less stress balancing them were the reasons for employing factoring in the first place - you may not fully be solving your problem. Many startups find this procedure rather confusing and keeping on top of it can take up much valued time, time better dedicated to your business.
Providing a non retention funding facility, New Millennia advanced 100% of an invoice initially in one simple transaction - much less to contend with. We aim to be as clear and transparent as we can in our efforts to make your back office frustrations a thing of the past. New Millennia can quite simply take care of it all; back office solutions is what we do, so while we can offer financial facilities and fund your transactions we can also offer full management of your timesheets and payroll, invoicing, credit control and legal contracts. All aspects of your financial management will be in one place, with full access to your online platform - easy.
Another issue that factoring can create is that a customer may not be happy to have their invoice effectively sold to another organisation - the factor. With you and your customers able to log on to your own individual portals to upload times sheets or invoices, all parties can be familiar with our process, delivering the level of equality and transparency to strive to achieve.
The majority of the factoring market is made up of recourse factoring, meaning that if a customer does not settle their debt, the client is still liable. New Millennia’s service provides non recourse funding, absorbing any late or unpaid invoices for you.
There are costs involved in factoring. The factor will likely take a percentage of the turnover or of the invoice, however there is often also a handling or account management fee, or potentially costs to sign up in the first place. With New Millennia funding, you only pay when you’re doing business - no monthly or weekly fees, and no sign up costs.
So, to sum up…
Factoring is an option available to provide quick funding to a business, it has worked for some and been around for a long time, however, as always, there is room for improvement. New Millennia have taken a look at funding and come up with an innovative financial facility.
We are a non retention, non recourse funding facility offering full funding and are proudly partnered with the REC. We offer an alternative, seamless and more refined system.
Our commitment to working with clients as partners offers a competitive level of service including our online platform, with your individual portal.
New Millennia offer efficient funding which enables you to access 100% of the invoice amount only one week after the invoice has been raised, no factoring involved; the only company to offer this line of account management in the UK.
By operating as a non recourse funding facility, we are also able to take the risk away from your company, concerning any late or unpaid invoices.
A simple worry free alternative funding facility to invoice factoring, and aid to your business needs, leaving you and your team free to look after new and existing clients.