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Outsourcing Collections

Feb 19, 2011 2:17:53 PM - thesundayleader.lk

Muthiah Harieharann

The emerging leader in factoring, Commercial Factors announced plans to expands its island wide reach through its parent company Commercial Leasing Company Ltd.’s (CLC’s) branch network, which has seen a rapid and sustained growth over the past year.
Rapidly expanding factoring portfolios have helped Commercial Factors to aggressively seek new markets in the provinces, making available its innovative service portfolio to the SME sector in the outstation.
Commercial Factors has taken thought leadership role in factoring in the past year, expanding awareness of this unique financing instrument. The company has established factoring divisions in all CLC branches, aiding outstation SMEs to access innovative working capital solutions offered by it.
With these planned branch openings, its network is scheduled to grow over  50, an impressive expansion, considering that Commercial Factors opened its first branch at the Pettah less than two years ago in  2009.
Factoring is a financing mechanism which offers upfront cash on credit invoices, providing companies with a means of financing its working capital requirements and additional cash flow needs by obtaining advances up to 80% of the value of receivables immediately. In other words, companies can obtain up to 80% of the value of credit invoices immediately.
Companies can transfer the entire burden of managing their receivables to Commercial Factors, reducing their own collection cost (which can be sizeable, considering the hidden costs such as telecoms, mailing and secretarial costs, staffing and transport, etc.) and instead allowing them to focus on their core competencies rather than on debt collection,’ said Commercial Factors Factoring Head Muthiah Harieharann.
But a point that is a cause for concern among many companies contemplating factoring as an option is the issue of how debts are collected by the factoring company. They fear that the factoring company may not treat their customers with the same courtesy and consideration they themselves give and thereby alienate those customers resulting in poor customer relations and future business loss. Commercial Factors officials were quick to point out that this is not necessarily so at all factoring companies.
“We employ specially developed software maintained online and efficient and a professional staff to manage the collection process, so all our clients’ customers are treated with courtesy and managed with care. In fact our current clients find our staff trained and courteous,” said Harieharann.
Factoring business has seen high growth in recent years, with Commercial Factors enjoying over 500% growth in business over the last five years, and the company believes that future growth could be even higher. ` Given the fact that companies are already borrowing trillions in overdrafts, it is likely that with our efforts at educating the market will result in many companies seeing factoring as a viable, favourable alternative almost immediately or in the near future.
“The 2011 budget is pro development, especially for businesses that are geared for growth and expansion. SMEs too have received many incentives and several impediments have been removed. We see this as a clear signal and intend to put all the resources needed by SMEs and corporates within their reach. It is this reasoning which has propelled us to rapidly expand our branch network so that SMEs in the outstation too can benefit from this unique financing solution,” said Harieharann