Invoice Factoring

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Accounts Receivable Factoring Services

Accounts receivable factoring is an effective, quick way to finance your business. First you sell your invoices to us, which we use as a leveraged commodity. From your invoices we will advance you up to the full amount of your invoices. Generally loans take 30-60 days in some cases even more. This is a long wait for any business; our invoice factoring eliminates the wait approving your order in 24-48 in most cases. With accounts receivable factoring your invoices free up capital, giving businesses another weapon in their arsenal of success. Get the money you need to run your business now.

Accounts receivable factoring is an accounting transaction that deals with billing. Usually a person or company owes money for goods and services provided by you. For most businesses an invoice is created and is then mailed to the customer. A set of payment terms was signed before the service was rendered, making this much like a business payment plan. Once the customer receives their invoice they must pay within an established time frame.

A common payment term is Net30, which means payment is due 30 days from when the invoice was received. Some other common terms are Net45 and Net60 but the terms are conditional depending on the agreement between vendor and client.

Booking a receivable is the easy part, maintaining and collecting payments is a full time job. Depending on industry factors accounts receivable financing can be received 10-15 days after the due date on the invoice. This kind of practice is developed by individual companies and policies.

When looking at a company's balance sheet the accounts receivable is the amount clients owe the company. This means they are an asset or a "current asset". In order to keep track and prevent any mistakes factoring companies use something called a trial balance, which means that's for every entry there must be a debit receivable and a credit revenue account. When a client pays off their balance one debits cash and then credits the receivable so that the ending balance is 0.

Many companies, particularly big corporations, have converted the process to work on a computer. This not only saves time but also money. There are many different programs that achieve this and large tech companies could use a program written by in-house technicians.

Not every customer will pay their debt on time, and because of this businesses have an allowance for bad debt, sort of like an overdraft balance in your checking account. If the debt exceeds the allowance then many companies choose to turn the invoices over to a third party collection agency. These agencies will attempt to collect the bad debt through payment plans, settlements and in rare cases legal action. Something to remember is that outstanding invoice factoring advances are part of the overall accounts receivables. When a company gets and order with advance payment included the payment terms reflect that. This means no billing is being done to claim the invoice funding advances, which in turn means they are not reflected in the account receivables. The accounts receivable factoring department turns the advances over to other departments for collection.

Invoice Factoring Services

Invoice factoring is utilized by companies who want to free up capital that is tied up in customer invoices owed. Instead of depending on clients to pay their invoices, the company sells its invoices to a second company, therefore requiring the clients to make their payments to that second company. Doing this benefits both companies; the first company has now eliminated their outstanding balance in a very short amount of time, therefore freeing up more capital, and the second company reaps the benefits of collecting money on balances due from clients. This is a win-win situation for both companies. Another benefit of invoice factoring is understanding that you don't have to take out a loan from a bank in order to cover the customer invoices owed, but instead you have the option to sell these invoices to another company that typically specializes in collecting outstanding balances. So overall, the initial company is debt free and does not have to be concerned about taking out a substantial loan from a bank in order to cover the amount of invoices owed.

Although invoice factoring has many benefits, it poses an obvious problem: your company can't afford to wait to get paid by your clients. This is an usual problem within small businesses because they don't have enough capital yet to sustain waiting for their clients to pay their outstanding balances. These companies need a fast and effective way to free up capital and not be submerged into debt before they can even get their feet off the ground. But opposed to other business financing programs, invoice factoring is an extremely quick, effective way to free up capital and get rid of outstanding invoices.