Monitoring & Collections

Factoring companies aren’t collection agencies and they have no interest in buying slow or non-performing invoices. In fact, the best factoring relationships are built when clients choose to factor their best-paying customers.

You might wonder, “Why would I factor my best clients when the slower payers are what’s hurting my cash flow?” It’s a good question. The truth is, if you can meet your working-capital needs using invoices from your stronger customers, the overall relationship with your factor will be far smoother and more rewarding.

Think about it this way: whether an invoice pays in 40 days or 70 days, the initial advance you receive from the factor is exactly the same. The difference shows up later. With slower-paying accounts, your factor may tighten credit limits, delay reserve releases, or charge higher fees to account for the extra risk.

When your customers pay consistently and on time, it gives your factor confidence. That translates into higher advance rates, quicker reserve releases, and lower discount fees all of which help you keep more cash in your pocket and your business running smoothly.

Once a factoring company makes an advance, they start paying close attention to your customers. They’re learning how each customer prefers to communicate whether that’s by phone or email and they’re working to build a bit of rapport while quietly tracking payment habits.

The first 60 to 120 days after funding are especially important. That window tells the factor a lot about how your customers pay and how reliable they are. A good factor will set up internal reminders (“ticklers”) in their system to check on payments once an invoice goes past a certain milestone without being paid. That’s usually when they’ll step in to follow up on the payment status.

And make no mistake if a customer tells the factor there’s a problem with the payment, a mistake on the invoice, or a dispute, you’ll hear from the factor right away. The goal isn’t to chase the customer it’s to get you involved quickly so the issue can be resolved and the invoice can get paid. That’s really the best outcome any factor can hope for.

Most factoring companies actually want you to keep doing what you normally do when it comes to monitoring and collecting payments. After all, you know your customers best, who needs a little reminder, who needs a firmer nudge, and how to strike the right tone.

A good factor understands they’re not a collection agency. They know that working with you not instead of against you gets better results for everyone. It’s a true partnership.

If the factor starts to see signs that a customer is dodging calls, breaking payment promises, or simply dragging things out, they’ll bring it to your attention right away. At that point, they’ll hand that account back to you. After all, it’s your customer, and you get to decide how to handle the situation going forward.

Most factoring companies have learned that there’s no need to make their presence more obvious than necessary. Yes, they’ll send out a formal Notice of Assignment that’s required, but beyond that, good factors handle customer interactions with a light touch.

In many cases, they’ll even call on behalf of your company, keeping the communication seamless and professional. Since they already have all the details such as invoice numbers, amounts, purchase orders, and so on, your customers can feel confident they’re speaking with their supplier.

The goal is to make the process smooth and respectful, keeping your customer relationships intact while still getting the information needed to monitor the invoices, keep payments on track which means reliable cash for you.