Keeping customers in the loop: Effective communication about invoice factoring

Keeping customers in the loop: Effective communication about invoice factoring

by Boyd Hunter, Chief Financial Officer, CPA

The decision to use invoice factoring is an especially important one for businesses. Partnering with a financial institution to set up a revolving line of credit funded by unpaid invoices offers a number of benefits. From significantly reducing the sometimes-long delays between providing a product or service and receiving payment to providing a more consistent form of revenue for your company, it’s clear why so many organizations turn to invoice factoring.

There are certain changes you should address to minimize confusion and maintain positive relationships with clients. While the change is ultimately small for both your own business and the customers who will now pay your bank instead of your company directly, making sure everyone stays informed is in your best interests. Keep this information and advice in mind to make sure your clients aren’t caught unaware by the change.

Explaining invoice factoring and its effects to your clients

You won’t need to worry about explaining involved financial arrangements or unfamiliar and difficult methods of payment to customers as you make the transition to using invoice factoring. The process is straightforward: You can simply say you’re selling your invoices to gain quicker access to the money owed to you, even if the true specifics are a little more complicated. You’ll want to focus on filling clients in on any changes they may experience after you establish your invoice factoring relationship with your bank ahead of time, to make them feel valued and appreciated.

Changes in payment

The one major difference your clients will experience with invoice factoring is where they send a check or electronic payment. This is a small alteration that every business should be able to handle without too much trouble – as long as you’ve told them to expect the change and provided correct information.

When you partner with a reputable financial institution in an invoice factoring relationship, that organization will provide notice to your clients about the change. A quick heads-up message from you or another employee can go a long way toward avoiding surprises and maintaining a positive relationship, however. You should also use this opportunity to point out that only invoicing and related payment needs are affected by this change – all other questions and conversations about your business can still be directed to the same familiar channels.

Getting the word out early

You should share information about this change before your clients receive notice from your bank, not after. It can be somewhat shocking to find out about what may seem like a major change without context, even though the explanation itself can be very clear and straightforward. Make sure to start this process earlier rather than later, to keep everyone on the same page and avoid any misconceptions.

You may also run into instances where your clients aren’t familiar with invoice factoring in general, especially if they’re smaller, newer businesses. If they bring up the topic when you call to let them know about the change with your accounts receivable, having some information on hand gives you another way to build your relationship. While you don’t need to provide more details about invoice factoring, it’s a polite way to satisfy general curiosity and appear interested and involved in what your clients have to say.

Offering an introduction to invoice factoring is relatively simple. You can either discuss the specific reasons why you chose to use this attractive financial option if you’re comfortable doing so, or discuss the broader benefits of invoice factoring if you don’t want to delve into details about your company’s operations. If you go the more general route, consider highlighting benefits such as the use of existing unpaid invoices as collateral, the flexibility of the agreement and the significantly reduced time to payment you now enjoy.

An invoice factoring partnership works best when everyone involved – your business, your financial institution and your clients – all stay informed. To learn more, get in touch with TAB Bank today.

The post Keeping customers in the loop: Effective communication about invoice factoring appeared first on TAB Bank.


About the Author

Boyd Hunter

Boyd is a Certified Public Accountant and received his Bachelor of Arts and Master’s degrees in Accounting from Utah State University. Prior to joining TAB Bank, he worked for eight years with Ernst &Young in that firm’s financial audit division and later became the Manager of the Salt Lake City Technology and Security Risk Services (TSRS) practice for Ernst & Young. He is a graduate of the Graduate School of Banking at the University of Wisconsin –Madison where he also achieved the Executive Leadership Certificate from the Wisconsin School of Business.

Boyd has taught upper level accounting and information systems courses at Utah State University. As CFO of TAB Bank, he participates in the strategic functions of the bank as well as oversees and directs all operations and personnel related to accounting, finance, enterprise risk management, and strategic partnerships. Boyd is active with several charity organizations including many community groups and local schools.

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