Business owners are often locked-in to unsuitable, mismatched finance products, so before you renew your existing contract, you should ask the following questions.

How fair are the terms of your contract?

  • Are you free to leave anytime you like without penalty?
  • Why do you need to be locked-in to a contract, to begin with? What does it say about a company's confidence in their service?
  • Is there a notice period that needs to be given if you choose to leave before your contract expires?
  • Can you pick and choose the debtors you want to finance?
  • Business requirements change all the time, so it doesn't make sense to commit to an inflexible contract arrangement.

What's the real cost?

Don't be swayed by the advertised "low service charge", as you'll often find that the total cost is very different. Many businesses are seasonal, so it's unrealistic to expect a business to need 80% of invoice value year round - which you're paying for. Ask the following questions:

  • Are charges are based on the “face-value” of invoices or on the funds you borrow?
  • Is there a minimum contract fee whether or not you use the funds or not?
  • How much time do you need to spend administering the facility?
  • Is a renewal fee whenever you extend your contract?
  • Are there any charges if you decide to increase your funding?

How easy is it to manage the facility?

Consider the layers of hidden administration with your existing facility.

  • How long does it take to establish the facility?
  • Does someone need to scan and upload invoices?
  • How many hours are spent each month administering the facility instead of being used for revenue-generating activities?
  • Does it integrate with your accounting software?
  • Are fees and charges automatically applied to your accounts?
  • What automation, if any, is provided to manage the facility?

What are your options?

Renewing contracts year-on-year without proper exploration of alternatives is a trait that plagues business profitability. Be sure to find out which finance option is most suited to your business.

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Team Waddle

Just a little pink duck, blogging about invoice finance