11:40 AM
Kinsz
The world of business is very complicated, and even seemingly straightforward deals can sometimes go awry. For example, at times a business may run out of cash when it needs it most. If this happens, there are a few methods the organization can employ to get the needed money. One of these methods is accounts receivable - factoring, that is, selling its accounts receivable.
If you are just starting to get involved in business, then you should take a little time to understand what this means. You can easily do this by examining the process piece by piece, and understanding what is involved.
There are many situations that may force one to sell his accounts. Maybe there is an impending merger for which you need cash, or you want to purchase the rights to a new product before a rival company. Alternatively, you may be in need of cash to use as operational expenses, or you just want to expand your business. If that is the case, you need to find a factor, a third party business, who is willing to buy your invoices.
To ensure that the factor does not run at a loss, an advance factor is executed. This means that only a percentage of all expected price is paid. The rest are cleared when the factor finally collects his dues. Of course, he has to deduct his fees and commissions first. Most of them offer upfront payments in the region of seventy-five to eighty-five percent of the total amount executed.
Any financial transaction must be made with a reliable company. In this case, it is better to deal with a long established company, rather than contract some new kids on the block. In addition, one must first inquire about certification and licensing of the factor. These licenses are there to safeguard both parties.
If am organization does not rely need fast cash, then it can opt for what is know as a maturity factor. In this case, no advance funds are issued. Both parties waits for the day of the settlement of the invoices, or a date very close to it, and the factor then pays out the entire amount at once. It is almost as if the factor is a collector for this money.
Some people have been confusing this form of transactions with loan. However, these two things are completely different. For a loan, collateral is usually needed, and this collateral can be almost anything in your business. This makes it a liability. For factoring, there is no collateral that will be required from you, since the money advanced to you is already in your invoices, and these are your assets.
This process of accounts receivable - factoring can be used by a company to increase its operating cash. In addition, you will also be relieved from the complicated business of cashing your invoices. Your employees should focus on production or delivery of services.
If you are just starting to get involved in business, then you should take a little time to understand what this means. You can easily do this by examining the process piece by piece, and understanding what is involved.
There are many situations that may force one to sell his accounts. Maybe there is an impending merger for which you need cash, or you want to purchase the rights to a new product before a rival company. Alternatively, you may be in need of cash to use as operational expenses, or you just want to expand your business. If that is the case, you need to find a factor, a third party business, who is willing to buy your invoices.
To ensure that the factor does not run at a loss, an advance factor is executed. This means that only a percentage of all expected price is paid. The rest are cleared when the factor finally collects his dues. Of course, he has to deduct his fees and commissions first. Most of them offer upfront payments in the region of seventy-five to eighty-five percent of the total amount executed.
Any financial transaction must be made with a reliable company. In this case, it is better to deal with a long established company, rather than contract some new kids on the block. In addition, one must first inquire about certification and licensing of the factor. These licenses are there to safeguard both parties.
If am organization does not rely need fast cash, then it can opt for what is know as a maturity factor. In this case, no advance funds are issued. Both parties waits for the day of the settlement of the invoices, or a date very close to it, and the factor then pays out the entire amount at once. It is almost as if the factor is a collector for this money.
Some people have been confusing this form of transactions with loan. However, these two things are completely different. For a loan, collateral is usually needed, and this collateral can be almost anything in your business. This makes it a liability. For factoring, there is no collateral that will be required from you, since the money advanced to you is already in your invoices, and these are your assets.
This process of accounts receivable - factoring can be used by a company to increase its operating cash. In addition, you will also be relieved from the complicated business of cashing your invoices. Your employees should focus on production or delivery of services.
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Unique financing products including factoring and accounts receivable factoring are solutions that can be customized to your needs. Contact Accutrac Capital Solutions today to get started!
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