In his blog titled “Journey of a Serial Entrepreneur,” Usman Sheikh discusses his approach to cash flow and liquidity difficulties that may be periodically experienced by some businesses. Invoice factoring is included in the mix. In the post, Mr. Sheikh refers to invoice factoring programs as “schemes” and warns those who may want to take advantage of these programs to read the fine print and be careful of restrictions applied by the factoring company.
One very appropriate concern that is raised is the perception that clients may develop about your business based on the use of invoice factoring. All of a sudden there ia a third party in the mix and that may send the wrong message about the solvency of your enterprise to clients whose invoices are being factored. I believe that communication with clients is critical in this instance and a call or email to a client letting them know that you are leveraging the strength of your receivables by factoring is appropriate. It may also prompt a speedier response to clients that realize the effect that their payment process is having on a key supplier.
But don’t count on it.
