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Invoice settlement agencies (Factoring for translators)
Thread poster: Pawel Gromek
Pawel Gromek  Identity Verified
United States
Local time: 21:39
Member (2004)
English to Polish
+ ...
Jul 23, 2008

Hello,

I have heard a while ago about companies which take care of all invoices for a several percent of the total. They supposedly pay the outstanding amount in a few days and charge a little percentage but one does not need to remind the client or chase them for a payment. Has anyone here heard anything about such companies?



Thanks,
Pawel

[Subject edited by staff or moderator 2008-07-24 07:06]

[Subject edited by staff or moderator 2008-07-24 07:09]


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Soonthon LUPKITARO(Ph.D.)  Identity Verified
Thailand
Local time: 09:39
Partial member (2004)
English to Thai
+ ...
Derbt collector? Jul 24, 2008

I do not believe in such an easy practice. It is not an easy money matter to process.
I hired some debt collecting companies to process with my outstanding invoices in many countries. They turned out to be useless:
1. They quoted for a large percentage of commmission fee.
2. They set conditions not good for creditors.
3. They never told about progress of the debt collecting processess.
4. They took no responsibilities afterward even I questioned about the final situation.

Regards,
Soonthon L.


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xxxUSER0059  Identity Verified
Finland
Local time: 04:39
English to Finnish
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Factoring? Jul 24, 2008

Pawel Gromek wrote:

I have heard a while ago about companies which take care of all invoices for a several percent of the total. They supposedly pay the outstanding amount in a few days and charge a little percentage but one does not need to remind the client or chase them for a payment. Has anyone here heard anything about such companies?


Have you tried searching for “accounts receivable financing” and “factoring”?


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The Misha
Local time: 21:39
Russian to English
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Factoring companies do not do this Jul 24, 2008

Not in this industry anyway. I know, since not too long ago I was investigating just such an idea of starting a factoring company for the translator community. In the end I gave it up - too much risk for too little gain. For factoring, you really need something tangible, like a steady revenue stream and a payer in you own country, rather than on the other end of the word, who is not going to disappear into thin air overnight.

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Paul Greer
United States
Local time: 18:39
English to Arabic
+ ...
Factoring, indeed... Jul 24, 2008

The process is indeed called factoring, where the European definition is actually accounts receivable financing, opposed to the American asset sale.

I doubt it is beneficial for a freelance translator though.

For one, most factoring firms I ever dealt with confined themselves to one national market. If you have clients in many different countries, you'd most likely have a hard time finding a company willing to take on the credit risk of factoring foreign invoices.

Further, for small- and micro-businesses each and every invoice is treated as a credit extended to you that will then be settled by the customer payment to the factoring firm. Factoring contracts are usually very complex, and contain a plethora of potential additional costs, depending on if the factoring firm is covering the loss risk or simply passes it back to you.

The inherent risk is, if you have a non- or late-paying client, you might end up paying collection fees and interest to the factoring firm on top of not having been paid.

No matter what market you operate in, factoring is nothing but a fancy word for getting a loan secured by an invoice given as collateral while still carrying the risk (Europe, not US). On top of it, if you don't have a stellar credit rating, factoring firms usually require more collateral or co-signers to secure what they pay out.

Factoring is very interesting if you trade tangible goods, because it is better to restock immediately after sales at discount than having to wait, essentially acting as the "buyer's bank".


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Paul Malone  Identity Verified
France
Local time: 03:39
Member (2004)
French to English
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You could ask your bank Jul 24, 2008

I use a very similar system in France, which works through my bank where I have my freelancer business account. It is run by another company within the same group as the bank.

I enter details of the invoices to be factored via their website, and the account is usually credited within 24 hours, or two days at the most. They also keep track of the agreed payment dates and contact the clients in case of late payment. I find clients are less likely to pay late with this system as they would not usually want to have problems with a large financial institution.

I can only use it for clients based in France, but I do not find that to be a drawback as it still helps me manage my cash flow.

There is, of course, a cost for this service, but personally I believe it is worth the cost as I find it is a great advantage to have a good cash position rather than having lots of work and an empty bank account. You have to pay your taxes and compulsory contributions on time to avoid penalties and other problems, so if your clients pay late you can end up with very little left in your account.

The 'factoring' system solves this kind of problem. It also leaves you free to take on large projects as you do not have to worry too much about invoice payments being too far in the future.

Maybe you could contact your bank and see if they can offer you any similar service in Poland?

Best regards,
Paul

[Edited at 2008-07-24 10:08]


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Pawel Gromek  Identity Verified
United States
Local time: 21:39
Member (2004)
English to Polish
+ ...
TOPIC STARTER
Re: You could ask your bank Jul 24, 2008

Thank you for an answer. Most of my clients are from North America and Western Europe so it's hard to limit oneself just to one country, especially given I don't really have any clients in Poland.

Can anyone recommend a company which has a coverage in North American and Europe?

Kind regards,
Pawel


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