Frequently Asked Questions
A practical example of possible savings
The costs of Invoice Finance are within the reach of many small businesses, being outweighed by savings and benefits.
Here is a practical example which may clarify these savings: |
Example:
| Company Turnover |
£1 million |
| Active Accounts |
125 |
| Average Invoice Value |
£550 |
| Factoring Service Fee |
£10,000 |
|
Compare this to the estimated annual costs of running the sales ledger in house:
| Debtor Statements 125 per month including postage, stationery and enveIopes = 1,500 @ 50p |
£750 |
| |
|
| Follow-up letters 50 per month = 600@ 50p |
300 |
| |
|
| Telephone costs collections, sales ledger, administration, details of payment (approx) |
£250 |
| |
|
| Solicitors costs assuming no more than 3 final letters per month @ £10 each |
£360 |
| |
|
| Litigation costs |
£1,000 |
| |
|
Bank Charges
- say 125 cheques per month @ 67p
- 20 counter credits per month @ 67p
- 1 bounced cheque per month - £3 |
£1,005
£161
£3 |
| |
|
Staff costs
- say 1 person on £10,000 salary per annum, spending 3 hours a day on the banking of cash, updating of sales ledger, customer contact, dunning letters, telephone collections |
£4,983 |
| |
|
| Management time - say 5 hours per week total |
£3,900 |
| |
|
| Total |
£12,712 |
| |
|
| SAVINGS (detailed below) |
£13,050 |
| |
|
| CREDIT |
£338 |
Notes:
The calculation is based on actual working examples. It takes into consideration the management and staff time customarily allocated to the preparation of a sales ledger of this kind. In calculating staff and management time, the normal costs of National Insurance, pension contributions and medical insurance have not been allowed for. Average outstanding invoices are assumed as £200,000
Not only can the savings effectively create a facility at no additional cost - using our own credit controllers will provide all year round credit control regardless of holidays and illness.
The savings can in practice be greater than this:
| Reducing your bank interest costs by collecting your debts faster (15 days to 10 days) |
Saving |
£1,800 |
| |
|
|
| The costs of obtaining credit information and from another source |
Saving |
£ 250 |
| |
|
|
| Additional cash discounts from suppliers for prompt payment |
Saving |
£7,500 |
| |
|
|
| Better allocation of management time |
Saving |
£2,000 |
| |
|
|
| Possibility of reduced cost of money compared to normal Bank Finance |
Saving |
£ 500 |
| |
|
|
| Reduction in staff generated costs. Savings on holiday pay national insurance etc. |
Saving |
£1,000 |
| |
|
|
| |
TOTAL: |
£ 13,050 |
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