Invoice Factoring Company United Capital Funding Corp - Factoring Invoices and Financing Receivables Loans Companies Factor

Invoice factoring company articles of interest to help your firm

Winning Business and Loyal Clients in Invoice Factoring - # V, Part 2 (cont'd)
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The areas that the checklist covers are comprehensive, and it is set up for you to go through and answer simple questions about your invoice factoring company, either “yes” or “no”.I like this approach because rather than focusing only on the positive or negative aspects of the business [often done], it presents you an opportunity to both grade your financing firm on what you are doing right “the yeses” and what you need to do that you are not doing, “the nos”.

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• Basis Planning [23 questions]
• Personnel [21 questions]
• Production [45 questions]
• Sales and Marketing [27 questions]
• Advertising and Promotion [19 questions]
• General Bookkeeping and Accounting Practices [32 questions]
• Financial Planning and Loan Proposals [20 questions]

While some of the questions need minor changes [for example, is there a website, is it up to date, relevant, are there SEO strategies, etc.] to update the audit checklist from when it was first issued in 1991, this is still a valuable tool for use in the SWOT process for receivables factoring companies.

The use of such a tool cannot be emphasized enough as it applies to commercial factors. As the authors state in the Introduction of the Audit Checklist, “Small businesses often fail because owners are unaware of the many elements that can prevent the business from growing and being successful." Often, small businesses are organized around the manager's specific area of expertise, such as marketing, accounting or production. This specialized expertise often prevents the business owner of invoice discounting companies from recognizing problems that may arise in other parts of the business.

This publication will provide the small business entrepreneur with the essentials for conducting a comprehensive search for existing or potential problems relative to the accounts receivable factoring market segment. The audit was designed with small businesses in mind and addresses their unique problems and opportunities," including those related to cash flow.

Finally, the authors also note, astutely, “This instrument is not exhaustive, i.e., the business owner/manager still must rely on personal judgment and past experience. However, it does provide a systematic framework to ensure that critical areas have been addressed before action is taken. The audit is a tool, not a replacement for good management skill. Audits and handbooks cannot do the consultant's job; however, effectively designed instruments, such as this audit, can save valuable time for the seasoned as well as the novice small business manager.”

The practical use of the Audit Checklist is also outlined in the Article by the authors. They note, “In order to gain maximum effectiveness from this audit, the small business manager should answer all questions in the audit, with an affirmative answer indicating no problem and a negative answer indicating the presence of a problem in a specific area.

After completing the audit, the business finance manager can review the analysis of each section of the audit that follows to determine what action is most appropriate. The audit analysis provides an overview of how the various elements of the audit are related. The authors have linked the seven critical business functions -- basic planning, general bookkeeping and accounting practices, financial planning and loan proposals, sales and marketing, advertising and promotion, personnel and production.

In the healthy and financially sound small business, these seven functional areas are in balance. In many cases, one cannot work on all seven areas at once. The manager must decide which area to concentrate on based on past practices and the needs of the funding business. Regular use of this audit instrument can help make the small business manager more efficient.”

What a great approach, much like a grade card in school. I could not agree more. We have not only used this checklist in our own invoice factoring and working capital funding firm, but also when we are analyzing a firm that we are considering providing working capital to. This makes the process easier to complete, and also makes the Due Diligence process less subjective and much more objective to providing working capital to our clients.

In the next article in this series, I will move on to how to begin the building of an effective cash flow and accounts receivable factoring marketing model; taking into account both the results of this SWOT process and the need to adopt a model that is both profitable and flexible.

Feel free to email me at any time with questions, observations, comments or if you need any additional information on the discussed topics. I can be reached via email at mark@ucfunding.com.

View and Print this entire Article, both parts, 1 and 2 (pdf version):
Winning Business and Loyal Clients in Invoice Finance (part V)