Invoice Factoring Calculator: Fees & Charges To Pay Attention To | Behalf
Using an Invoice Factoring Calculator? Watch Out For These Factoring Fees And Charges
An invoice factoring calculator is a useful tool for companies that want to determine whether or not they should factor their receivables. They want to speed up the payment process, but also want to extend trade credits to customers for a competitive edge in the market. The problem lies in the tendency for trade credits to attract slow and even non-paying customers. They abuse lenient payment terms and put companies in a tough spot financially when outstanding receivables begin to pile up. Those companies turn to factoring because they believe selling their outstanding receivables will wash their hands of the problem. In reality, invoice factoring is expensive and it is not always the best solution for companies with a growing pile of outstanding receivables. If your company is considering factoring, do your research.
There are invoice factoring calculators all over the internet that can help your company determine what the cost of factoring entails and if it is smart to pursue. Calculating the cost of factoring manually is challenging because factors sneak in hidden fees and other variables that merchants do not anticipate. Invoice factoring calculators on the internet are relatively simple and accurate. The invoice factoring calculator will ask for certain inputs and assign a value to how much factoring a particular invoice will cost your company. Though the invoice factoring calculator will handle the calculation, you need to understand the factoring fees and charges it takes into account.
What factoring fees and charges go into invoice factoring rates?
This article reviews some of the variables that impact the calculation, plus other significant invoice factoring fees, to give you a fuller understanding of what it will cost your company.
Invoice Factoring Fee
This fee is what you owe for the factoring services themselves, including invoice processing and collections. It may be the only fee your company is expected to pay or one of many, depending on the factor you choose. This fee is typically a percentage.
The advance rate is the percentage of the invoices factored that your company receives upfront. Though it is a significant amount of the invoice, it is not everything. On average advance rates range between 60 and 80 percent, though there are exceptions.
You might encounter a discount fee with certain factoring companies, which is charged to the amount you borrow. According to the Invoice Factoring Forum, “it is the base rate plus the margin multiplied by the average borrowing.”
These are small fees that the factor charges in special circumstances. The invoice factoring calculator may not include disbursement fees, but you still want to be aware of them. Your factor could try to sneak them in on your monthly statement and after a while they start to add up. Be proactive and ask ahead of time for a list of disbursement fees.
Minimum Factoring Fee
You may also be charged fees when your activity falls below the minimum financing volume stated on your agreement with the factoring company. You may only be charged the amount you did not cover with activity or you may be penalized.
Again, note that the factor may not charge all of the above fees and other fees might apply. Ask the factoring company which specific fees you will be charged and input those into the invoice factoring calculator. Depending on the resulting calculation, your company may or may not want to pursue factoring. If not, don’t despair; there are other more affordable options available that can remedy your company’s payment delays.
Instead of factoring your company’s invoices, consider offering your customers a business line of credit so they can always pay you on time. Behalf’s business purchasing line of credit can instantly increase your customer’s purchasing power up to $50,000. There are no hidden fees and affordable rates for both your company and its customers. Your business customers can make larger, more frequent purchases when they use the line of credit to pay you, the vendor. You get paid within 1 day and your customer can customize their payment schedule and extend payment to Behalf up to six months. The funds on their line of credit replenish as they pay, giving them constant access to working capital.
Learn more about how Behalf is transforming the way business buy and sell here.