Invoice finance: Missed opportunity for accountants | AccountingWEB

Invoice finance: Missed opportunity for accountants

Accountants understand the benefits of using invoice finance, but they are not recommending the option to clients, according to a recent survey.

Of the 101 accountants asked by commercial finance company IGF Invoice Finance, more than two thirds (67%) have never made use of invoice finance for their clients.

Despite this more than half (56%) said at least one of their current clients would benefit from this kind of facility, while some respondents said they had up to 20 clients who would benefit from it.

Tracy Ewen, managing director at IGF, said...


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ireallyshouldknowthisbut's picture

.    3 thanks

ireallyshouldkn... | | Permalink

That made me laugh given how many clients we desperately try to get OUT of factoring as its dragging their business down. 

The banks are awful at selling this and strong arming people into it as they make so much money out of it. 

In 8 of 10 cases the answer is not factoring at all, it is very simply shortening the cashflow cycle with better billing and debt collection procedures.  Not very sexy of course and not much the banks can sell to you on that front.


this is Aweb second attempt at this    5 thanks

carnmores | | Permalink

we no likey

Kent accountant's picture

Anyone heading into factoring    1 thanks

Kent accountant | | Permalink

has to have an exit strategy planned.

if you need factoring because you're growing and suppliers need paying quicker than customers pay you, then by all means use it.

You do need to plan to build up sufficient cash (from the profits made) to be in a position to exit.

18 months is a sensible timescale.

As @ireallyshouldkn...  says, most businesses use it  due to their own bad cash management.


Makes me think of the times when accountants billed on completion of work and had to finance the client's inability to pay on time using factoring facilities (they use to be called something else - a fancy name which made them appear as something else)- so its little wonder that most accountants don't use it. 

Invoice Financing

Peteralco | | Permalink

Truth of the matter is throughout the recession UK SME Plc has not been investing; have been paying down debt (not taking more on) and so Invoice Financing (IF) has not been an appropriate funding tool.  IF only works effectively if you are expanding - its a complete nightmare if you are in decline because the facility unwinds.  Unfortunately, when people plan to take on IF they only consider the upside and dont read (or ignore) the small print over concentrations (ie when funding is restricted when too much business with one or few customers) or when debt becomes aged or ineligiblel for other reasons.  IF has a part to play in the funding mix but you need to consider the 'what ifs'!

I hear on the grapevine that Barclays is launching a new IF product which is a half way house between factoring and overdraft- watch this space.

Short term use only    2 thanks

keelan | | Permalink

Agree with Kent accountant, factoring can be useful in periods of growth but an exit strategy is essential with such an expensive financing model.

I'd imagine my experience is similar to others here - factoring tends to be recommended by the bankers to a stuggling company when they are starting to get a bit twitchy about recovering the borrowings - they may not want to pull the plug themselves so they shift the debt elsewhere, often within the same bank to avoid it being in their bad debt figures.

I've had several clients over the years who have had the 'we're going to call in your overdraft so factoring is your only choice' ultimatum - this was usually followed by up to 2 years of huge fees before the inevitable happened.

ireallyshouldknowthisbut's picture


ireallyshouldkn... | | Permalink

I would quite agree with use in limited circumstances, and with the T&C's not loaded such as you cant get off it.  Forcing you to put ALL your invoices through for example is nothing short of a scandal. This seems to be a 'standard term' until you make a real fuss about it.  It would be like my putting through an invoice I sent out this morning for a last gasp SA return which has been paid already as he wanted it filed today!

Locutus's picture

Abandon all hope ye who enter    2 thanks

Locutus | | Permalink

I would regard it as the option of absolute last resort ... a sort of pay day lender for businesses.

The businesses that I have seen who enter this black hole of credit, rarely have the power to leave it and after a couple of years of being tossed around are finally crushed.


ShirleyM's picture

Introducers fee

ShirleyM | | Permalink

The accountant gets a perk though ....

"Now there’s 500 more reasons to recommend IGF

For every business you recommend to us that goes on to become our client, we will give you, or your nominated charity … £500"


Kent accountant's picture

IGF getting clients on the cheap    1 thanks

Kent accountant | | Permalink

£500 is that all!!!
If you sign up as an introducer for IGF, you'll get 20% commission ( on the monthly service charge paid by customer you introduced). That is for the life of that client.
Added to that 20% of the service charge levied on the debtor book taken on at the start.
So £500 is a mickey take.

Locutus's picture

Where does the money come from?    1 thanks

Locutus | | Permalink

Kent accountant wrote:
£500 is that all!!!
If you sign up as an introducer for IGF, you'll get 20% commission ( on the monthly service charge paid by customer you introduced). That is for the life of that client.
Added to that 20% of the service charge levied on the debtor book taken on at the start.
So £500 is a mickey take.

Whether the commission is £500 or 20%, it will all ultimately have to be paid by the company using invoice finance ... a company which was probably already in financial difficulty.

It kind of proves the point that a lot of us have implied - invoice financing should be regarded as an expensive lender of last resort.

Kent accountant's picture

@Locutus    1 thanks

Kent accountant | | Permalink

Agreed, cost is borne by the customer - just find it galling that IGF have the cheek to offer accountants £500 as though its a wonderful thing, when industry standard commission is much higher.

(I know because I have finance brokers as clients).