Selling unpaid invoices if you are self-employed (UK)
Thread poster: Giulia Piantoni

Giulia Piantoni
United Kingdom
Italian to English
+ ...
Mar 1

Hi All!

I was wondering if you know of any company that buys unpaid invoices from self-emplyed?
I found a lot that would do it for LTDs but nothing for self-emplyed, so I wonder if any of you have ever done it.

I am aware that I will incurr in a fee but this time I rather have my money ASAP than wait around for when they decide to pay.

Thanks a lot!

Giulia


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Chris S  Identity Verified
United Kingdom
Member (2011)
Swedish to English
+ ...
:-O Mar 1

There will be loads - look on Google.

But the fees are astronomical. And think of the admin too.

Surely it would be cheaper and easier to get an overdraft?


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Giulia Piantoni
United Kingdom
Italian to English
+ ...
TOPIC STARTER
Overdraft is not the solution :( Mar 1

Hi Chris,

Thank you for your reply. I have already tried to Google it and all I can find is companies willing to buy unpaid invoiced from LTDs and not from self-employed, this is why I posted on the forum. I hoped someone could help me out.

I would rather not apply for an overdraft as the invoices will still need dealing with; it is 11 in the morning now, and I phoned the customer twice already with no luck. This is why I wanted to sell them, to avoid all the hassle which it is costing me a lot of time.
I'd rather pay the fees and have this over with!

G.

[Edited at 2017-03-02 10:59 GMT]


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Tom in London
United Kingdom
Local time: 17:56
Member (2008)
Italian to English
? Mar 1

Chris S wrote:

There will be loads - look on Google.

But the fees are astronomical. And think of the admin too.

Surely it would be cheaper and easier to get an overdraft?


I've never heard of this. Is it legal?


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Erik Freitag  Identity Verified
Germany
Local time: 18:56
Member (2006)
Dutch to German
+ ...
Factoring Mar 1

Tom in London wrote:

I've never heard of this. Is it legal?


Haven't heard of it? Surely it doesn't exist, then. Or does it?

https://en.wikipedia.org/wiki/Factoring_(finance)


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Tom in London
United Kingdom
Local time: 17:56
Member (2008)
Italian to English
My question was....... Mar 1

...is it legal?

Specifically: if I have issued an invoice and then I sell it on, how do I keep a record of that in my accounts?


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Chris S  Identity Verified
United Kingdom
Member (2011)
Swedish to English
+ ...
Yes Mar 1

Tom in London wrote:

...is it legal?

Specifically: if I have issued an invoice and then I sell it on, how do I keep a record of that in my accounts?


Yes, it's very well established. Loads of companies sell their debts. Boosts cash flow and saves the effort of collection.

As a limited company, we get contacted by factors all the time.

The accounting treatment of it can be complex.

http://www.accountingtools.com/questions-and-answers/how-do-i-account-for-a-factoring-arrangement.html


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John Fossey  Identity Verified
Canada
Local time: 12:56
Member (2008)
French to English
Factoring Mar 1

Tom in London wrote:

...is it legal?

Specifically: if I have issued an invoice and then I sell it on, how do I keep a record of that in my accounts?


Usually you are paid by the factor as soon as you sell the invoice, called assignment. It's then up to the factor to collect it from the debtor. It would be off your books as soon as the factor pays you.

Of course you only get a discount from face value - for small amounts typically 50% and only from clients with a good credit record. So it's a means of speeding up cash flow, not for collecting bad accounts, because the factor won't buy an invoice for a client with a poor credit history.

It's typically used by fast-growing start-ups who are constantly in a cash squeeze due to their growth, not typically by professionals with a steady income.


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Kevin Fulton  Identity Verified
United States
Local time: 12:56
German to English
Not for microbusinesses like low-volume sole proprietors Mar 1

In my region of the US, factors often prey on physicians who rely heavily on payments from Medicare or insurance companies which pay 90 days+ after invoice submission, usually involving many thousands of dollars per month. The payers are creditworthy, so the risk to the factor is minimal. As someone mentioned, the invoices are sold at a discount which can be deep. A single-shingle translator is unlikely to generate the volume of business to make it attractive to a factor, and the customers of translators, frequently agencies, do not necessarily have the creditworthiness that would attract a factor, even if the translator managed to generate $10,000 in business a month.

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Sheila Wilson  Identity Verified
Spain
Local time: 17:56
Member (2007)
English
+ ...
Debt recovery company? Mar 1

John Fossey wrote:
it's a means of speeding up cash flow, not for collecting bad accounts, because the factor won't buy an invoice for a client with a poor credit history.

This makes it sound as though factoring probably isn't the way to go with this one, not that I know much about factoring.

I would have thought that a debt recovery company would be the obvious choice here, assuming that it's a one-off need. The small claims courts would probably get you 100% but there would be some hassle and no doubt a long wait. Debt recovery companies often charge a percentage of what they are able to collect, typically around 30% of the invoice total. If they fail to collect you pay zero; but then you receive 0% of the invoice as well. They normally act fast.


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