| If you are considering using accounts receivable | | | | problem for factoring invoices. Common to the |
| factoring as a financing tool, you should carefully | | | | publishing and advertising industries, the customer is |
| consider the type of billing arrangement you have | | | | invoiced for invoiced for a publication that will run in |
| with your customers. Invoice factoring relies on | | | | the future. From a factoring standpoint, proceeds of |
| important considerations concerning your business | | | | the obligation are assigned to a third party. If the |
| model that could make it easier to get funding. | | | | work has not been satisfactorily completed, the |
| When you initially set up your agreement with the | | | | customer likely will not pay the entire amount, if at all |
| customer, you should specifically outline the work to | | | | because there are too many "outs". The factoring |
| create deliverables or milestones that allow you to | | | | company has advanced a significant amount of funds |
| invoice. By setting these milestones, the customer is | | | | up front, so they are left holding the bag when the |
| obligated to pay for the work to that point and you | | | | customer refuses to pay. In this situation, the |
| can generate an invoice for that part of the goods | | | | factoring company will almost assuredly adopt |
| or services. Contrast this scenario to progress billings, | | | | recourse factoring. This means that if the customer |
| an arrangement in which the customer advances | | | | doesn't pay the client the full amount that was |
| money for the job as a whole. The factor is hesitant | | | | invoiced, the factoring company can collect the |
| to advance funds to the client with progress billings, | | | | money that was advanced. |
| since the company getting billed may become | | | | Even if you don't need to factor your invoices, it is |
| unhappy along the way and stop making payments. | | | | usually better to structure your invoicing in such a |
| With milestones, on the other hand, that is not a | | | | way that the customer is obligated to pay during |
| problem. | | | | each step. The milestone arrangement is the best |
| Pre-billing for services is another example of a | | | | way to accomplish this goal. |