Will my customers know I’m factoring?
Oct 27, 2020
A business’s communications with its customers, particularly around finances and payment, is essential to the business relationship. So naturally, one of the first questions a business new to factoring often wants to know is how we will work with their customers, known to us as account debtors. In addition, many wonder what their customer’s perception will be of the factoring arrangement. Here is an overview of how our communications typically work at various stages.
1. Verification Communications
When we are first evaluating financing opportunities with your business, we will need to verify your invoices. In today’s digital landscape, it’s getting much easier to verify invoices without Catalyst contacting your debtors directly. The majority of large companies have invoice portals. You can provide us login information or send us screenshots directly from the portal for validation. If a company doesn’t have a portal, many of our clients request an open statement from the debtor and then copy us into the communications. We are flexible in this process and let you lead the communications, while ensuring we get proper validation.
2. Regular Operations
Once we have our agreement established, a Notice of Assignment (NOA) is sent to the debtor. The NOA informs the debtor of our financial arrangement and updates them as to where they will remit payments. The debtor then updates their information and starts paying you directly through Catalyst.
3. What if a debtor doesn’t pay their invoice?
In the instance that a debtor is late on payment, we again work with you to manage communications as you best see fit for the business relationship. We are not a collection firm, and we are sensitive to your preferences. Many of our clients will replace the invoice and manage the follow-up process themselves. However, if you would like our assistance, we will help with demand letters and direct communications.
In our experience, the vast majority of customers’ debtors do not care how a business is handling their financing, as long as they are financially secure. Moreover, in many businesses no one other than the AP department knows the details about the arrangement. Generally project managers and field personnel are not involved in the details of the payment process or any changes in remit information.
In fact, with many of our clients, it’s the companies they sell to and work with that refer them to Catalyst. A couple recent examples where the debtor recommended they work with Catalyst are below.
Factoring Referral Example #1
Challenge: Alexis Group Logistics, a trucking company, had a great relationship with one larger logistics company that gave them a lot of business. They were using factoring because they needed to speed up cash flow to pay drivers and purchase equipment. However, their factoring company was limiting the concentration they could have with one business.
Funded: The logistics company recommended the trucking company work with Catalyst. We were able to offer much more flexibility on the percent of work the company could have with one debtor. This flexibility allowed the trucking company to
Factoring Referral Example #2
Challenge: An oilfield services company was established because of the increased demand for welding and fabrication to service the fracking fleets in West Texas for the oil & gas industry. They had been self-funding and operating successfully for over a year. However their largest customer came to them and offered to triple the amount of work they were currently giving them but they would have to wait 60 days for payment. In order to purchase the materials and cover payroll, they couldn’t wait 60 days for payment.
Funded: In their discussions with their customer, the customer recommend they talk with Catalyst. After setting up a factoring facility with Catalyst, they are now able to fulfill not only the additional volume with this customer but have been able to secure new business with other customers as well.
If Catalyst’s communication with your customer is still a concern for your business or you have specific cases where you need us to handle the communication and payment differently, we do offer alternative solutions. At the end of the day, our goal is that everyone’s objective remains growing your business to better serve your industry.