Below we list the five reasons some professional service firms give to NOT offer fee funding to their clients. Do any of these resonate with your firm?
- Our firm doesn’t have an issue with debtors.
That’s possibly true – if all clients pay within your terms of trade. If you’re honest with yourself though, the reality is that while you will very likely get paid, it might not always be on time. It’s probably been this way for a long time, so you may not see it as a pain or a problem.
If your terms of trade require payment in 14 days, and your average debtor days are over 28 (twice as high as expected), you should take time to look at options for those clients that are paying slowly.
- We don’t like the reversion risk when a loan comes back to the firm.
When we hear this, we need to remind firms that they already have the default risk – 100% of it – before we advance any cash. The client owes 100% of the debt right now! The benefit of the fee funding is not that it completely negates the default risk, but that it reduces it (each month) and significantly improves your cash flow because you get the cash up-front. The maths is simple and means a professional firm can only ever be better off!
- We offer in-house payment plans.
That’s great. You recognise that sometimes clients need that time to pay – but you truly are acting like a bank for your client. You have to setup, document and administer ongoing payment plans. You retain 100% of the default risk and get no cash flow benefits. You will definitely incur additional costs. Does that really make sense when you consider it alongside the smartAR Fee Funding model? A model which is specifically designed to provide the same outcome, but with lower costs and better cash flow benefits.
- Our clients can arrange their own funding.
Yes – many can and maybe some do now. But the convenience and cost effectiveness of using a specialist funder makes much better sense.
With other banks or finance companies your clients would likely face large setup fees ($500+) and from credit application to loan could take weeks – with a real risk that a funder may decline the application. With smartAR fee funding the transaction is able to be completed within 5 minutes and you can be paid the next day.
- Our clients would never use smartAR Fee Funding!
After 17 years and with 1,000+ firms using fee funding we can confidentially call “bullshit” on this statement. Firms may honestly believe they know what their clients will and won’t do, but if you never ask a client, how you can really know.
smartAR has provided the Great Wine Challenge for 17 years: you offer fee funding for six months and if no client picks it up, we buy you a bottle of Grange – which is some of the best Shiraz/Syrah in the world worth, circa $1,000. I have yet to buy a bottle.
Think about it carefully. Every firm will have a client that needs (or simply prefers) to spread a chunky bill out from time to time. Meet your client’s needs, and that’s another bottle of wine I will never buy.
smartAR Fee Funding is a tried and proven tool for your firms accounts receivable team. It occupies a niche sometimes needed but never replaces other payment methods.
Why not add it to your toolbox today?