
Retainer Fee: Everything You Need to Know About
Get expert tips on setting retainer fees that are fair and reasonable.
TABLE OF CONTENT
Invoice financing is a convenient tool for establishing regular cash receipts to your account, even if clients have not yet paid. Its essence lies in involving a third party in your relationship with orderers, which acts as a sponsor. You give finance providers or factoring companies invoices samples for which you wait for payment; they give you a large part of this amount. Sometimes, it can reach 90% of the total sum.
That is, invoice finance meaning implies that you take money from a third party. However, it doesn’t mean that customers don’t need to pay. In general terms, the process of using this tool is as follows:
The main benefit of invoice loans is that you can get them quickly. Depending on the agreement terms, it usually happens within two days. You receive money and can immediately use it for the business development or the implementation of another project instead of waiting for receipts from a client for 30 or more days. It reduces your downtime and the likelihood of losses.
Since you can sell invoices for cash and not wait for money from orderers, you get the opportunity to offer customers more generous terms. It makes your company more competitive. You maintain mutually beneficial relationships with clients and, at the same time, don’t stop work in other areas. Besides, the larger the sum in your sample invoice law firm or any other company issue, the bigger loan you can get.
Although the advantages of this tool are impressive, don’t forget about the disadvantages. Remember that this money is not entirely yours, so overleveraging should be avoided. Depending on the specific provider, invoice factoring costs and fees can be pretty high in total and amount to about 30% of the entire sum. If your debtor fails to pay, you will have to compensate for these losses from your own funds. So, you’re not protected from non-payment risks.
When considering this tool, you should weigh all the invoice discounting advantages and disadvantages and the possible consequences for your business.
Get expert tips on setting retainer fees that are fair and reasonable.
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