What is e-factoring?

E-factoring: definition

L’e-factoring ou factoring online is the English version of online factoring. It is therefore a factoring derivative .

Factoring is basically a financial process that enables you to sell your invoices to a factoring company in exchange for early payment of your receivables. Online factoring, or e-factoring, is a new version of factoring, in which all operations are carried out electronically. This is also known as dematerialized factoring.

For example, in the context of e-factoring invoices are sent over the Internet and no paper documents are required. All the advantages of dematerialization are here:

• Fast transactions ;

• Paperless ;

• Reducing carbon footprint;

• Etc.

However, to ensure the security of the transaction, exchanges are carried out via a secure server equipped with an electronic signature and an access code, and the process is thus favored by recent changes in regulations which recognize the legal value of the electronic signature.

This technique is made all the more possible by the new regulations on dematerialized invoicing.

Why use e-factoring?

E-factoring can be used to meet a number of challenges:

Improving cash flow

E-factoring is an advantageous financing method for companies. It makes it possible to obtain funds quickly without having to go into debt . It offers the luxury of obtaining payment of receivables without having to wait for invoices to fall due.

Fewer manual entries and manipulations: an administrative advantage

Thanks to the dematerialization of the transaction, employees have less work to fill in written subrogation receipts. These are required to inform customers that their invoices have been assigned to a factoring company. Similarly, it is no longer necessary to send invoices and receipts by post.

E-factoring enables you to drastically reduce the administrative workload for invoice processing.

Rapid financing

With conventional factoring, it takes between 48 and 72 hours to obtain financing for assigned invoices. Invoices can be sent over the Internet, faster transactions . Invoices are received instantly by the factor, as and when they are issued.

The financing is therefore in less than 12h . This is a major advantage in a world where speed means productivity gains. With Hero, you can finance your invoices even faster. Click here to find out more .

The possibility of outsourcing accounts receivable management

E-factoring offers the same advantages as traditional factoring. It includes complementary services such as customer workstation management . In other words, the administrative follow-up of invoices, upstream verification of customer solvency and reminders in the event of non-payment are now all part of the company's core business. entrusted to the factor . In this way, the factoring company also avoids this component, freeing up staff for more productive tasks.

Flexibility

While factoring has long been the preserve of large accounts, online factoring is now a reality. makes this technique more accessible to small and medium-sized businesses . The difficulties encountered by these companies in obtaining bank loans are well known. With factoring, the constraints are less discriminating, as the factoring company simply checks the creditworthiness of the customer.

The guarantee against non-payment

Factoring involves coverage against the risk of non-payment . The same applies to online factoring. The factored company receives payment of its invoices regardless of the circumstances. On the other hand, to cover its own risk, the factor requires creation of a guarantee fund which it bails out by withholding the amount of invoices sold.

What are the disadvantages of e-factoring?

E-factoring doesn't just have advantages. Here are its main drawbacks:

Significant costs

Of course, e-factoring comes at a price. The factor has to be able to earn a salary and recover its costs. The costs of e-factoring These include not only factor commissions, but also account opening and management fees.

Furthermore, factoring does not recover only a portion of its receivables since these are deducted from the various costs associated with the operation. The company can only recover up to 90% of its receivables .

This is why they should be taken into account before resorting to online factoring. Online factoring can increase your company's costs.

Potential deterioration in customer relations

Customers are notified of the existence of the factoring contract. In other words, they are made aware that the company is using a third party to collect its receivables. On the one hand, this leads them to ask questions about your company's solvency. On the other hand, if the factor is inflexible in collecting receivables, customers may be less inclined to return to do business with your company .

How to choose an e-factoring company?

E-factoring is an increasingly popular technique. There are many e-factoring companies to choose from:

• The costs . With e-factoring, you can collect between 80% and 90% of your receivables. This range varies according to the costs charged by different factoring companies. However, it's important not just to compare costs, but above all to compare each factor's offer.

• Factor conditions . Some factors require a minimum factoring threshold to be met. If this threshold is not reached, the company may have to pay penalties. So make sure you are comfortable with these conditions before choosing a factor.

• Required guarantees . Some factoring companies do more than simply set up a guarantee fund. They also require the company director to act as guarantor. In general, e-factoring companies require little collateral.

• The financing deadline . As we have seen, the main advantage of e-factoring lies in the speed of funding. The faster the funds are released, the better.

How much does e-factoring cost?

The costs of e-factoring depend on several factors:

• The company's financial health . The more you show signs of financial risk, the more expensive the factoring operation will be for you.

• Type of offer . There are different types of factoring. The factor can provide you with different ranges of offers. Customized offers are generally more expensive.

• The risk level of the company's customers . The higher the risk of insolvency, the higher the cost of e-factoring.

E-factoring companies generally practice lower costs than traditional factoring companies. However, the various elements of the transaction cost are the same. It includes both the factor's commission and ancillary costs. Factors are remunerated in two ways:

• The financing commission . It is intended to remunerate the cash advance made. Its amount varies according to the risk incurred by the factor.

• Factoring commission . It is determined on the basis of various criteria, including :

  • Number of customers ;

  • The number of invoices assigned ;

  • Total amount ;

  • The company's overall situation.

In addition ancillary costs related to customer account management and insurance against non-payment.

How can you benefit from the advantages of e-factoring without the disadvantages with Hero?

Hero is THE payment solution dedicated to SMEs . It also offers an online factoring solution. Hero offers instalments and deferred payment . This means you can offer your customers the option of paying their invoices after 30 to 60 days in 3 or 4 monthly instalments. However, the platform pays you an advance of 80% of their amount within 24 hours of receipt.

So it's definitely an alternative to e-factoring. However, the conditions are simpler. No registration necessary. All operations are carried out smoothly and quickly.

Similarly, the more transparent pricing . When the debtor pays the invoice on the due date, Hero recovers the amount advanced, plus a handling fee. It transfers any surplus to the company .

The process is the same for your supplier payments. You can pay in 3 or 4 instalments, or by deferred payment. However, the platform also advances payment.

In conclusion, the e-factoring is a fast, flexible financing method tailored to the needs of SMEs. However, it is also suitable for occasional cash flow requirements. If you need an automated e-factoring solution, choose Hero, the payment solution tailored to the needs of SMEs.

Other articles on the same subject:

• Factoring: what is it and how does it work?

• Spot factoring: definition, advantages, operation

• Factoring for very small businesses: Hero makes it easy to finance your invoices

• SME factoring: finance your invoices easily with Hero

• Factoring for training organizations: Hero makes it easy to finance your invoices

• Online factoring: finance your invoices online with Hero

• Factoring contract: definition and how to draw it up

• Factoring company: what is it and what is it for?

• How much does factoring cost and how can I calculate it?

• Factoring: what is it?