Why Sitting on Payments Is Something We Don’t Do
The vast majority of factoring companies are run by ethical business owners who do their utmost to do right by their customers. But as in any other industry, there are those bad actors who feel as though they need to push the envelope. One of the oldest envelope-pushing tricks in the book is sitting on payments in order to increase fees.
Sitting on payments is something we don’t do. We make every effort to be completely upfront and transparent about all our business dealings. We want to earn your business and keep it. We only make that harder on ourselves if we don’t do right by you.
Making Money on Fees
As you know, making money by factoring invoices is all about fees. Factoring companies have their visible and hidden fees, all designed to make sure they get paid for the service they provide. If you are ever unsure about our fees, don’t hesitate to ask. We are happy to explain exactly how our free structure works. Again, our goal is to be completely transparent.
If you’re working with a different factoring company, they should be able to tell you exactly how they assess charges on late payments. In addition, you really should know what the factor considers a late payment. Let’s say your terms are forty-five days. A payment that comes in on day forty-three is on time. Hopefully, your factoring company agrees.
How Payment Sitting Works
The practice of sitting on payments is pretty straightforward. If a payment comes in close enough to the due date to allow for it, a factoring company might delay posting the payment until after the due date passes. Sitting allows the factor to assess its late fee.
Again, this is something we don’t do. We process and post payments as soon as they are received. That ensures your clients get credit for paying on time while you don’t spend any extra on late fees.
As a side note, late fees are generally taken out of escrow. A late fee here and there may not seem like a big deal, but they can add up over time. That’s why it’s a good idea to encourage your customers to pay their bills before the due date.
Ask for Detailed Records
In order to ensure you’re not paying more than you should, ask your factoring company for detailed records. Ask for records on each transaction – including when payment was received, when it was posted, etc. You can compare the data against any records you might have.
In the event there are discrepancies, you can also contact your clients and ask them for their payment records. Just explain that you are verifying when payment was sent, how much was sent, the means of payment, and who actually made it. With any luck, comparing all the available records should clear up discrepancies or misunderstandings.
Not the Norm
We are happy to report that sitting on payments is not the norm. Again, most factoring companies are run by ethical business owners who wouldn’t think of doing such a thing. But it can happen, so just be careful. You can always work with us to factor your invoices. Invoice sitting is something we do not do. We take pride in charging fair fees and being upfront about it.
Your number one priory is protecting your business and the customers who support it. You need a factoring partner that shares that commitment. A good factoring company can go a long way toward helping you maximize cash flow so that you can steadily grow your business.