Factoring is a consulting-intensive financial service due to its long-term nature and complex contract structure. A key component is the processing of new customer inquiries through structured lead management. Do you have a CRM system for efficient processing of inquiries? How long does it take you to qualify inquiries?
SME factoring on the rise
Despite the pandemic, members of the German Factoring Association achieved sales growth of 1.6% in the first half of 2020. According to the Bundesverband Factoring für den Mittelstand (BFM), SMEs even recorded an increase of 5.3%. Many BFM members also reported an increase in new customer inquiries (see Ritter, Michael, FLF, January 2021).
SME factoring is therefore still on the rise.
Lengthy sales and initiation process
Due to its long-term nature and complex contract design, factoring is a financial service that requires a lot of advice - especially in the acquisition and specification phase. The effort involved in the specification phase is comparatively high in the financial sector anyway. The customer has various provider options and often concludes the transaction with the most cost-effective provider. The assessment of the commitment and the decision are therefore a considerable resource-intensive process from the perspective of both the connecting customer and the factor.
Criteria for selecting a customer
Potential follow-up customers must meet certain criteria in order to conclude a factoring framework agreement, e.g:
- Reaching the minimum turnover threshold
- The existence of assignable receivables (e.g. receivables term, payment terms)
- Appropriate debtor quality (payment behavior, concentrations, etc.)
- No exclusion sectors (as anchored in the factor's credit policy)
This means that customer interest must be (pre-)qualified in order to determine whether it is worthwhile for the factor to take a closer look at the company. When determining the factoring-eligible receivables portfolio (the sales potential of a subsequent customer), the following receivables must generally be deducted from the total portfolio:
- Old receivables (usually > 90 days)
- Receivables from certain export countries (e.g. crisis regions)
- Receivables from affiliated companies
- Special customers (e.g. one-off project business)
- Customers with a poor credit rating
Multi-stage qualification process for new customer enquiries
Determining the sales potential and evaluating a potential customer is not trivial and cannot be determined at first glance. Factoring therefore involves a multi-stage qualification process that ranges from the mere consideration of knock-out criteria to a detailed creditworthiness or structural analysis, as well as a risk assessment of the factor's overall portfolio. This qualification process can be mapped and supported using the lead function of Microsoft Dynamics 365 Sales. Based on our industry expertise, we have created an uncomplicated and quick-to-use CRM template with predefined process steps and checklists, which offers added value in factoring that can be realized in the short term.
Conclusion
- Never miss a sales opportunity again! The CRM lead management system records and tracks customer interest.
- An integrated qualification process enables the identification of suitable target customers.
- Potential-oriented resource allocation and optimized cost allocation
- With the CRM template from NAVAX, you can design the lead generation process in a semi-automated, structured, transparent and targeted manner.
