Understanding Dreams Come True in Business: The Best Steps

Factoring is one of the terms used in the financial environment. This can be seen as an alternative that allows having accounts receivable in advance. Three actors participate in this activity: the factoring company, the seller or client and the debtor.

This financial service offers immediate financing to the customer of its commercial credit sales to other companies, or obtaining the insolvency guarantee of its buyers.

The operation of the factoring begins when the customer, natural or legal person who has credit rights in force, derived from commercial operations, goes to the factoring company. The financial factoring company will be the one that assumes the different credit risks that the client takes, evaluates the credit conditions of the debtors and informs its clients of the changes in the solvency of the same, in addition to, among other things, taking actions of collection. For the factoring accounts receivable this is important.

Being an alternative financing line, it facilitates the provision of funds according to the needs of the company. For example, whenever sales occur, they can be transformed into liquid assets, and with this service there will be a mobilization of the debtors’ portfolio and the collection of all of them is guaranteed.

With factoring, a company could improve its financial situation and the monetary position, since it avoids debts that could increase liabilities.

Factoring accounts receivable (Factoring)

Factoring is a variant of financing that is executed through a contract for the sale of accounts receivable. It is an operation consisting of the advance of cash against invoices originated by commercial operations, and includes the cession to the factor of the collection rights so that this one makes the collection on account and representation of the client. Factoring operations can be carried out by financing entities or by credit institutions: banks, savings banks and credit cooperatives.

Reorganization of the client portfolio

For the managerial staff, saving time spent supervising anddirect the organization of a sales accounting. No indebtedness: firm purchase without recourse. It allows receiving advances of the assigned credits. Simplifies accounting, since through the Factoring contract, the user has only one client, who pays in cash.

In the current context, traditional factoring companies are also striving to offer innovative and complementary services in order to better meet the needs of small and medium-sized businesses. For example, an outsourcing of cash management to be able to focus on the commercial plan, or a proposal of tools allowing companies to send the files via internet.

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