The typical concerns and needs of SMEs - our experts know the answers

In order to provide you with an indicative factoring offer, we need the structural data of your company such as gross turnover p.a., the number of active debtors (if applicable: listed separately in Germany and abroad), the number of invoices issued p.a. and the payment terms granted to your customers.

In addition, we require information on any existing trade credit insurance and business management documents, including a current open items list for debtors and creditors.

As the requirements of a company and the offers of the various factoring providers can differ greatly, we have collected a few tips for you here to help you make the right choice: The factoring contract – what should you look out for?

In factoring, the entire customer portfolio does not necessarily have to be sold. We also offer the option of partial factoring, in which only selected parts of the customer portfolio are assigned. Invoices from customers for whom factoring would not be worthwhile, such as cash discount payers or debtors with very low turnover, can of course be excluded. However, we do not offer financing for individual receivables.

If a one-off liquidity gap needs to be overcome, we recommend quickpaid. With quickpaid you can finance your purchase of goods and this is also possible with individual, selected invoices. You can find more information on this at www.quickpaid.com.

Factoring is also and especially useful in such cases. We offer the purchase of receivables from debtors based in OECD countries (individual exceptions apply) and can finance in various currencies: Euro, CHF, USD and GBP.

This makes it much easier for our customers to expand abroad, as we check the creditworthiness of the buyers – a task that is often difficult for factoring customers to research themselves. In addition, we not only take care of communication, but also offer a comprehensive security package with 100% bad debt protection. We also offer suitable solutions for debt collection services for debtors based abroad.

With our product “quickpaid”, the online purchase financing from A.B.S., you can optimally utilise discount advantages and thus reduce your purchasing costs. “quickpaid” enables you to settle your supplier invoices immediately, even if you are still waiting for payment from your customers. By quickly providing the required liquidity via “quickpaid”, you can benefit from the discounts that many suppliers offer for early payment.

This is how it works:

• Immediate payment to your suppliers: With “quickpaid”, we settle your supplier invoices directly so that you can take advantage of the discount.
• Cost reduction: The cash discount deduction reduces your purchasing costs, which has a direct positive impact on your margin
• Liquidity advantage: You remain financially flexible and can organise your own payment terms with us according to your needs.

With quickpaid from A.B.S. Global Factoring AG, you can optimally utilise cash discount advantages while strengthening your liquidity and competitiveness.

If one of your customers does not pay their invoice, you are fully covered by us against del credere risks. Another particular advantage for you is that you can take advantage of A.B.S.’s benefits for major customers and also have an experienced specialist in the field of dunning at your side. This offers you a high level of security, even if your customer files for insolvency.

As an independent financial services provider, we perform our tasks with all our experience and proceed rationally and with the necessary sensitivity. After all, we want to ensure that your customer relationship is not negatively affected and that your invoices are paid promptly. To achieve this, we consult closely with you.

Ultimately, you decide whether legal recovery proceedings or debt collection proceedings should be initiated, whether a reminder stop should be imposed or whether the insurance benefit should be waived.

No, factoring and debt collection are not the same thing. The only thing both models have in common is that there is a payment obligation between the service provider/supplier and the customer, which is processed by a third party.

There is a major difference in who is the legal owner of the invoice. While the factoring provider becomes the owner of the invoice in factoring, the entrepreneur remains the owner in debt collection. Another key difference between the two models is that factoring only takes over invoices that are not yet due – i.e. no overdue or non-payment invoices.

In addition, factoring offers more services. Factoring providers such as A.B.S. take on the financing, the full default risk, the dunning process and accounts receivable accounting. This significantly reduces the burden on companies. If a customer does not pay, debt collection can of course also be part of the service offered by a factoring service provider in individual cases.

Yes, it has. We often observe with our customers that the granting of long payment terms due to competition can become a burden. This means that valuable working capital remains tied up in accounts receivable for the duration of the payment period and cannot be used to cover current expenses. If the invoice has still not been paid after the due date, this means that cash is missing. Weeks often pass before the customer’s payment arrives – it costs time, money and nerves.

Stopping deliveries now can be dangerous, but so can tolerating payment behaviour. One solution to this dilemma is to outsource debtor management to professionals. Not only can this aspect of the customer relationship be outsourced, it also has another positive effect. The maturity structure of the receivables portfolio changes after just one year. There are fewer overdue receivables in the portfolio and the average duration of overdue receivables is significantly reduced.

The external impact of factoring

Factoring has changed and is now an established part of SME financing. Outsourcing processes for which in-house expertise is still limited, such as effective accounts receivable management, is in vogue. Another factor that speaks in favour of factoring demand is the fact that so-called FinTechs also offer factoring-like financing solutions. Nevertheless, we believe that the expertise of the original factoring companies will remain indispensable in the future. After all, factoring is more than just technology. After all, each customer needs to be looked after and assessed individually – and experience proves to be a key quality factor.

The following tips will help you switch providers without any problems:

1. Finish a clear tripartite agreement with both the old factor and the new factor so that it is clearly regulated which receivables belong to whom and how payments must be forwarded. A foresighted demarcation and definition of the transitions in advance helps to avoid time-consuming clarification steps. We will be happy to help you with this.
2. Discuss special cases, e.g. what happens with impending claims or defaulted receivables.Clarify the IT interfaces clearly so that the automated data transfer works smoothly
3. Clarify the transfer channels and check whether the new factor uses the same booking system as the old factor.

Discuss the risk policy. Different providers differ significantly here. This also includes agreeing the debtor limits within which invoices are purchased from a particular debtor.Inform your debtors in good time about the change of factoring provider. We have already prepared the necessary documents for you for this communication, e.g. change of payment details.

In this case, a bridging loan from your bank could help. If your house bank does not provide a further credit line, you should think about alternative financing options. The authorisation process at your bank often takes far too long. Factoring institutes are usually more flexible, agile and quicker. This helps you to secure the liquidity you need for your current expenditure.

If the payment returns from your large orders cannot be optimally scheduled, the alternative is to finance the outstanding amounts for the entire duration, i.e. the entire debit-side payment term granted, through factoring. This ensures that your liquidity is independent of your customers’ payment returns. This makes cash management much easier and meeting important payment deadlines, such as health insurance and social security contributions, is no longer such an onerous challenge for you.

Even if it is frequently used, an overdraft facility is not always the optimal financing solution. Especially if a company is not doing well in terms of creditworthiness, a bank often refuses the loan, charges high interest rates or demands high collateral. Here you should think about rescheduling the overdraft facility into more favourable, possibly longer-term loans, possibly approach other commercial banks and, above all, think about other, alternative financing options! Factoring institutes, for example, operate differently to banks: not only is the creditworthiness checked, but above all the value of the receivables. Thanks to factoring, liquidity can be generated quickly from tied-up capital.

Another tip would be to research the causes: how did the current account line come to be utilised? Are there possibly short payment terms on the part of suppliers versus long payment terms on the part of customers? If so, it is also worth considering the sale of receivables, i.e. factoring, in order to optimise payment terms. Financing procurement via quickpaid would also be worth considering.

Clearly yes! Nowadays, the financing market offers a colourful bouquet of options, so it doesn’t necessarily have to be a bank loan with collateral. Especially as the valuation of collateral sometimes involves high security discounts, which can result in considerable financing gaps. Nowadays, financing can also be secured for SMEs without collateral – so why not learn from the big players?

Specialised institutions such as leasing or factoring companies are experts in the valuation of machinery, vehicle fleets, equipment and receivables. If you decide in favour of such an alternative, you will generate more liquidity by using your assets than by taking out a traditional bank loan. While a loan will be exhausted sooner or later, factoring offers you a continuous cash flow even as your turnover grows.

First of all, we recommend optimising your accounts receivable management so that services rendered are invoiced promptly and unpaid invoices are dunned immediately or even transferred to debt collection. With this measure alone, you will already be able to realise a lot of capital from your outstanding debts.

You should also rethink your cash discount policy and shorten your debtors’ payment terms. This can also significantly reduce your outstanding receivables.

In a second step, you should get an overview of the regular payment dates and then coordinate these better with the payment returns. If it becomes apparent that you do not have sufficient liquidity, you should ensure that this is extended. One option would be to look for a second bank that provides a current account overdraft facility. If this is not possible, or if it is not possible in principle, factoring can be used as a supplement. With the right financial mix, entrepreneurial freedom can be created that not only provides more peace of mind in the bank account.

Financial stability is crucial for long-term success. With factoring, you can tap into a reliable and predictable source of financing that increases your liquidity and reduces your risk at the same time. By selling your receivables to us, A.B.S., you benefit from immediate payment receipts that increase your financial flexibility. This allows you to:

• Avoid payment delays: You are no longer dependent on your customers paying on time, as you receive the invoice amount immediately.
• Gain planning security: With stable liquidity, you can plan and invest your business expenses better without being surprised by short-term liquidity bottlenecks.
• Achieve better conditions with suppliers: With secured liquidity, you can make early payments and benefit from discounts and rebates.

Factoring therefore offers you a continuous and reliable source of financing that stabilises your company’s finances and gives you the freedom to concentrate on your core business.

As a start-up or growing company, it is crucial to always have sufficient liquidity to make investments, cover operating costs and drive growth. Factoring offers you the opportunity to convert your outstanding receivables into cash immediately. Instead of waiting for payment from your customers, factoring gives you immediate liquidity that directly benefits your working capital. This enables you to:

• • Faster growth: Invest in new projects, products or markets without having to rely on long payment terms.
  • Flexibility: Use the additional financial resources to react quickly to market opportunities or to overcome unexpected challenges.
  • Risk minimisation: With factoring, you are not dependent on your customers’ payment habits, which offers stability, especially during growth phases.

Factoring is therefore an ideal instrument for optimising your working capital and keeping your company on the road to success, regardless of whether you are just entering the market or looking to expand.

Sufficient liquidity is a basic prerequisite for maximising your cash discount potential. In addition, strict monitoring of payment deadlines and dates can help you to avoid missing any more discount deadlines or cash discount dates. After all, supplier credit is one of the most expensive forms of financing of all. You should therefore avoid this type of financing at all costs. By utilising cash discounts when paying your supplier liabilities, the costs of procuring and purchasing goods are automatically reduced, which in turn increases the margin, i.e. your profitability.

If, despite all your efforts, your liquidity margin is not sufficient to utilise the cash discount payment target, we recommend that our customers implement quickpaid purchase financing. With quickpaid, suppliers are paid immediately and with a discount. The financing costs are usually covered by the cash discount or are even lower – this depends on the amount of the cash discount. What remains in any case is an extended payment term for repayment and therefore real added value for your liquidity planning.

Expanding your market position abroad means having the courage to think outside the box and, in some cases, to work with previously unknown customers. While trust is good here, control and knowledge of the creditworthiness of new customers is definitely better and more secure in order to avoid payment defaults, which can be costly for a company. One way of ensuring payment security here would be to deliver only against advance payment and to agree no or only short payment terms. However, this is not always advisable in terms of market penetration, as longer payment terms are common in many export markets than in Germany.

Another support would be to rely on experts for an independent credit check, preferably in conjunction with insurance against default. Credit rating information is provided by credit agencies or chambers of commerce. Protection against bad debt losses can be covered by a credit insurer, which also covers the risk of default abroad minus a deductible.

If you want to take your foreign expansion even further in the direction of an “all-round carefree package”, receivables financing through factoring can help: here, the loss of receivables is even 100% covered. You can also grant your customers abroad longer payment terms in order to achieve a stronger market position – perhaps even longer than the competition…

Growth always involves a whole range of factors, from marketing to customer support, to name but a few. Of course, financing is also essential, but unfortunately there is no one-size-fits-all answer to this question, as the financing must first and foremost fit your business model. From subsidised loans to investors or crowdfunding – there are many options these days.

What we often see in growing companies, however, are unexpected leaps in turnover. And as nice as these are on the one hand, they can become a stress test for your cash flow. We therefore recommend choosing a “growing” form of financing. In other words, if sales increase, the underlying financing should do the same, preferably in a linear relationship. The best method of choice here is factoring. This is why it is rightly called growth financing.

When it comes to utilising purchasing opportunities, pre-financing special sales or large orders or balancing out seasonal peaks, our smart online financing quickpaid is also a good option. This allows you to purchase goods and services without having to accept a fixed credit line or lengthy application processes.

The advantages of quickpaid at a glance:

• Immediate payment of your supplier invoices – you secure your supply chains and remain flexible
• Extended payment terms of up to 120 days – More financial leeway for your company.
• Secure discount & increase profitability – utilise discounts and improve your margins.
• Simple, digital processing – Fast, flexible and without complicated applications.
• Plannable liquidity – For more focus on your core business.

Particularly valuable: With quickpaid, you can utilise cash discount conditions in negotiations with your suppliers. Because if attractive discounts are possible, quickpaid pays off twice – through more liquidity and direct savings.

Conclusion: For sustainable growth, we recommend a dynamic financing solution that adapts flexibly to your turnover. Factoring allows you to secure your liquidity on an ongoing basis, while quickpaid enables you to cleverly finance strategic purchasing decisions.

The use of suitable software can help to maintain an overview. However, this also requires time and expertise in-house, otherwise not much is likely to change. If you do not want to or cannot develop your own staff for this task, it makes sense to outsource this area.

The monitoring of the development of the open item list should be carried out by professionals who manage the receivables portfolio in a system-controlled manner and with a neutral view, thereby always maintaining an overview. In case of doubt, they must initiate the dunning process in good time or take over the collection of receivables. This professional handling prevents monetary losses. The accounts receivable managers of an experienced factoring service provider, such as A.B.S., know what they are doing and, with their expertise and instinct, not only provide the right overview, but also save a lot of money, as the repayment rate of debtors is demonstrably improved.

The issue of bad debts is often greatly underestimated, as even a good customer structure does not protect against bad debts. It is therefore essential to decouple the dependency between sales and bad debts and both should not rise or fall to the same extent.

Depending on the margin, a bad debt loss can have devastating consequences for a company, because in a competitive market and with a low margin, sales cannot be increased at will to compensate for the loss. It is therefore essential to avoid a loss of receivables at all costs, which is easily achieved with trade credit insurance – provided that you observe the limits granted to your customers and follow their recommendations when generating or expanding sales.
The premium option would be a factoring solution that provides 100% protection against bad debt losses.

In the long term, an improvement in the balance sheet structure can only be achieved with sound earnings from a secure business model. Everything else will follow by itself.

In the short term, the aim can be to reduce the balance sheet in order to improve the rating. This generally improves the balance sheet ratios, such as the equity ratio, to the company’s advantage. Balance sheet reduction measures are achieved by reducing or selling balance sheet items on both the assets and liabilities side, e.g. the sale of the “trade receivables” item together with the reduction of trade payables. This is made possible by the proceeds from the sale of receivables. Leasing can also be considered.

It is important to ensure that the correct balance sheet items are reduced and that equity is strengthened in proportion. The rest will then take care of itself.

If you have any questions about how you can use factoring effectively to reduce your balance sheet and optimise your rating, please do not hesitate to contact us.

Yes, as a company in crisis, you can still use factoring. At A.B.S., we place a special focus on the quality and volume of your outstanding receivables. In difficult times, the asset – i.e. the receivables themselves – can be more important than the general creditworthiness of the company. If your receivables are solid and your debtors pay reliably, factoring can be a valuable source of financing to improve your liquidity and bridge financial bottlenecks.

Yes, factoring can be an effective solution to close your liquidity gap. With A.B.S., you receive immediate funds against the sale of your outstanding invoices. This means that you do not have to wait for the regular payment terms of your customers to dispose of your capital. Instead, you can obtain liquid funds at short notice by selling your receivables and bridge your liquidity gap in a targeted manner.

As a rule, factoring is difficult in insolvency, as the financing of receivables often depends on the creditworthiness of the company and the solvency of the debtors. At A.B.S., however, we can offer factoring even if the company is in insolvency proceedings. In such cases, we must ensure that all legal and financial conditions are clearly defined and that the receivables are free of third-party rights. It is advisable to contact us directly for a detailed assessment of your specific situation and to discuss possible options.