Invoice Factoring - How it works

Posted: 1st January 2015

Usually a business will need to offer credit terms to their customers. These can sometimes range between 30 and 60 days.

However, most business owners can’t wait that long for payment and often need the funds sooner, so they can pay their suppliers, staff and other business expenses.

Invoice Factoring is a solution that releases cash tied up in your outstanding customer invoices, so you don’t need to wait until the customer pays to access this cash.

There are 3 parties to an Invoice Factoring agreement

1. Your Business

2. Your customer

3. The Invoice Factoring Company

In the 1st part of the process you deliver goods or services to your customer. You then raise an invoice (for example £10,000) and you offer terms to your customer.

You would then send a copy to Macla Money. We would release up to 90% of the invoice amount to you (which is often the same day you send the copy to us).

So based upon a £10,000 invoice, we would send cash to you of £9,000 (including VAT).

When your customer pays the invoice, as this is factored by Macla Money, they make payment to us and the remaining 10% or £1,000 is released to you, minus our fees.

As part of this process Macla Money can manage the credit control for you; collecting cash from your customers over the phone which is a professional service many of our clients like to use.

Once your Invoice Factoring arrangement is in place, as you increase your sales, you don’t need to worry about having enough cash to fund growth because your facility grows with you.

For more information or for a detailed quotation, please visit our Contact Us page or call us on 020 3555 4545 and we will be more than happy to help.

Coming soon. Our whiteboard video about how Invoice Factoring works.