The Situation
Monthly factoring fees were running $6,600. At that pace the company was on track to pay roughly $80K in factoring expense for the year — more than its trailing net income. Factoring had started as a short-term cash fix and quietly become a permanent fixture in the cost structure.
Nobody had asked the hard question: with AR running at 42 days and a real (if imperfect) collections process, why was factoring even necessary?
What CEI did
Ran a root-cause audit on the factoring need: invoice delay timing, client compliance with payment terms, and the actual quality of the collections process.
Identified that factoring was patching a self-inflicted cash flow problem, not a customer problem — invoices were being held until job close-out, sometimes weeks after work was complete.
Built the path off factoring: tighten the AR cycle, fix the invoicing trigger, restructure the line of credit, and reprice client terms where contractually possible.
Modeled the breakeven exit: how many weeks of disciplined AR before factoring becomes unnecessary, and what the carry looks like in the transition.
$80K/Yr
Factoring Spend Targeted for Exit
100%
Net Income Recovered
2-3 Cycles
To Full Independence
Factoring moved from “permanent fixture” to “exit plan with a calendar date.” The company stopped paying double-digit rates on its own receivables and reset the conversation with its lender on terms that actually fit the business.
In Their Words
“We had been paying $80,000 a year to solve a problem we created ourselves. Once we saw it on paper, the path out was obvious.”
— Owner | Confidential Client