is the cash purchase of your sales invoices at a discount by another party (the
The rate of discount varies between factors and the services included. The factor advances you up to say 80% of the value of your invoices and takes over the collection of your accounts from your customers.
are two factoring types:
balance, less the factoring fee, is paid to you when the factor receives the
customerís remittance. You
are still responsible for bad debts.
factor company carries the bad debt risk.
No further fee is paid
can be some difficulties with factoring.
For example, the link between you and your customer can be broken through
the factor handling statements and cash receipts, so look for a factor that
provides a confidential service. Also,
the factor may impose tighter credit controls than you would normally adopt,
leading to a loss of sales. So
make sure that the factor does not interfere with your credit policy.
is one way that businesses can improve their cash flow and maximise the use of
their working capital.
services are available from finance companies an factoring companies.
If we can assist further, please email TotalAccounting as follows:
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