Factoring case history – an interesting story

Last month I lost my largest factoring client which although sad personally does provide me with an interesting factoring case history for one of my now very rare blog posts.

The company involved was a recruitment agency turning over several millions that had approached Factoring Solutions some six years ago saying that they weren’t happy with their existing factoring arrangements and as a result I placed them with a factor that I had used for many years who offered back office facilities as well as having a reputation for excellent service levels.

The client’s systems were not brilliant but were deemed to be adequate and although it wasn’t the smoothest running account as time went on more and more mistakes were being made by the client on time sheets resulting in invoices being disputed. This was partly due to the huge turnover of accounts staff as they never seemed to last long.

Factoring case historyThe factoring company contacted me in July whilst I was enjoying the Madeira sunshine to tell me that they were concerned at the deterioration in the ledger and were worried that their investment was at risk feeling that if anything happened they would be unable to collect out. They had offered to send one of their client managers down to sort out the administration feeling that it wouldn’t take them long but the client refused.

I had a further telephone call a couple of months later from the factoring company saying that they were now extremely worried and they asked me if I would like to move the company to another factor but regretfully I felt that in all conscience I wouldn’t be happy doing that knowing that there were serious problems  within the portfolio and the factoring company responded that in view of the fact that the client had refused all offers of help they had no option but to give them three months notice of termination.

The company has now moved on and has ended up with one of these newish factoring companies which I know little about but a few minutes at Companies House show that two years ago the factoring company had a negative net worth and charges over it’s assets by it’s directors, neither of which are a good sign.

In the old days it was a rarity for a factoring company to go bust but recent years have seen more and more newer independent small factors ending up in Administration which is quite worrying and I am hoping that one mal administered recruitment company won’t be enough to take down another one.

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