- Learn day trading forever
- Learn to play guitar as though you are learning a new sport
- Important safety tips for motorcycle accident prevention
- Industrial design processes & resources
- Increase your sales lead list using myspace
- Is it wise to form an investment partnership
- Israel petrochemical enterprises ltd – financial analysis review—-aarkstore enterprise market research aggregation
- How to obtain quick profits on ebay – make very fast cash on ebay
- Know much more about the best great carpet albuquerque
- How to avoid pitfalls for live chat outsourcing:
- Introduction to steel roof structure design services
- How to add more value to your joint venture with intellectual property
- How to reduce your auto insurance premiums
- How to be rich beyond your wildest dreams
- Learn how to use scissor lift training through online classes
- Is it possible to sell your scrap gold for cash
- How a credit analysis service differs from a debt settlement program
- Leading public relations new york firm – working smarter and faster
- Isa – obama, the democrats & the mass media betray us again
- How to buy stamps online
- Impact panasonic tools offer quality and variety
- How to give a great speech
- In the modern world the role of multinational corporations
- Laser labels and their applications
- Less than half the price for a replica bag
- How to write an award winning sales letter
- How to establish a presence with office furniture
- Laboratorios andromaco sa andromaco financial and strategic analysis review — aarkstore enterprise
- How can i use promotional items to promote my business
- Lazy cash formula scam review – warning
- Land trusts and real estate investing
- Knowing about mean manufacturing
- Interoute (wholesale)-aarkstore enterprise
- Know more about armani sunglasses
- It’s all about the product
- How to get cheap domain name and hosting
- How to find the best accommodation adelaide has to offer
- Legit online jobs reviews
- Learning to make money online: the easy and sure fire way
- Indian chemical directory 2010" added in visionshopsters
- Learning about boosting the sales of your internet marketing ebook
- How to stop an irs levy – tips for urgent irs tax relief
- Keep your profits running with retail accounting
- Keeping your computer safe from vicious viruses, spyware and spam e-mails
- Keep your clients happy with corporate concierge london services
- How much do portable display stands cost on average
- Insurance 101
- Key players in the global confectionery industry (5th edition) —- aarkstore enterprise
- Icf international, inc
- How do i access criminal records free of charge to view peoples criminal past
If your business is facing cash flow challenges, account receivables factoring may be the ideal solution to the problem. With receivables factoring, you sell your accounts receivable or invoices to generate quick cash. Receivables factoring is a common practice that’s been used for centuries by businesses around the world to manage cash flow. In fact, receivables factoring transactions in the United States, alone, exceed $60 billion per year, according to the Commercial Finance Association.
Benefits of Receivables Factoring
There are a number of benefits to receivables factoring. A major reason is that it gives you the ability to immediately access cash owed to your company. For some businesses, this minimizes the need to incur debt for operations while waiting for invoices to be paid.
Another advantage of factoring is that it provides a smoother, more consistent cash flow. Instead of wondering if or when you will receive payment from your customers, you can accurately predict when you’ll receive payment based on the terms of your relationship with the receivables factoring company. Businesses typically must wait 30, 60, or even 90 days to receive payment on invoices for products or services that have been delivered. During this time, these funds are tied up and inaccessible to the business. However, receivables factoring can eliminate long billing cycles and enhance cash flow.
Also, factoring eliminates the need for you to handle your own collections. Factoring companies are run by professionals who specialize in collecting and tracking invoices. This translates into an overall reduction in the amount of bad debts and fewer headaches for your business.
Receivables factoring can give you access to cash within 24 hours, which can help you effectively meet short-term cash flow crunches. It also can help you:
• Accelerate cash flow, making it easier to make payroll, pay taxes and fulfill new orders.
• Offer better terms to large customers and increase sales.
• Extend credit to large customers without asking for COD.
• Pay your suppliers faster; take advantage of early pay discounts.
• Purchase equipment, inventory and supplies.
Qualification for Receivables Factoring
Just about every type of industry that generates commercial invoices can and does use receivables factoring. In general, if you pay for labor or materials prior to receiving payment from your customers, factoring can help your business. Or if your business is growing faster than you can generate additional working capital-from private sources or from a bank-factoring can probably provide the cash you need for steady growth. Also, if you have a fairly new business that can’t qualify for bank financing, factoring may be ideal for you.
To qualify for receivables factoring, your company will have to meet to two basic conditions. There can be no existing primary liens on your invoices, meaning no other company should have a claim on the payments when they come in. Also, your customers must also be creditworthy. The factoring company will evaluate your customers on the basis of how quickly they’re likely to pay their invoices.
Prime Candidates for Receivables Factoring
Is your business a prime candidate for receivables factoring? Receivables factoring may be the perfect solution if:
• Long billing cycles are putting a strain on your business cash flow.
• You’re spending too much time collecting from slow paying customers and not enough time building your business?
• The bank has denied your request for a traditional loan because of your lack of years in business, profitability, assets or overall financial strength.
• Your business could increase sales by offering better terms to your new and larger customers.
On the other hand, receivables factoring may not be a good fit if your business is running on low margins-less than 10 percent. Receivables factoring also won’t make sense for your business if you have ample working capital and cash flow isn’t a problem.
How It Works
With receivables factoring, you essentially liquidate or sell outstanding invoices to a factoring company to receive immediate working capital. The company buys the invoice from you for a cash advance amount slightly less than face value, and then later collects the full amount when the receivable is due. Once the factoring company receives full payment for the invoice, you’ll receive the remaining amount-minus a fee. Generally, the receivables factoring fee amounts to three to five percent of the invoice value.
Factoring companies have different fee structures, but factoring fees typically involve:
• Advanced funding – When you send in an invoice to be factored, you’ll usually receive 70 to 90 percent funding of the invoice amount within 24 hours after the invoice has been verified. Then the advanced funding is wired to your business bank account.
• Discount rate or factoring fee – The factoring fee can range between 2.5 percent and 3.5 percent per 30 days, or .1 percent for every day the invoice is unpaid after factoring. (Factoring fees can be customized to the individual needs of your business and customer base.)
• Remainder of the advance minus the factoring fee – When your customer pays the invoice, you will receive the remainder of the advanced funding, minus the factoring fee or discount rate.
Here’s an example of how receivables factoring works. Suppose you have a customer XYZ Company, which owes your business $100,000 for a shipment of your gadgets that were just delivered. XYZ Company is a large customer that has good credit, but they never pay their suppliers (you) any sooner than 45 days. Instead of waiting 45 days to receive payment for your $100,000, you decide to take advantage of receivables factoring. The factoring company verifies your invoice to XYZ Company and you receive 80 percent of the $100,000 ($80,000) within 24 hours, wired to your bank account.
If you have a discount rate similar to the one previously given and XYZ Company pays the $100,000 invoice in about 45 days, this equals a factoring fee of 4.5 percent of the original $100,000 ($4,500). Since you have already received an advance of $80,000 from the factor, you’ll receive the remaining $20,000 minus the factoring fee of $4,500 ($15,500). Ultimately, you’ll collect $95,500 of the original $100,000 invoice.
Keep in mind that the percentage charged by a receivables factoring company is generally more than you would pay for a short-term commercial loan. For that reason, factoring is best used to generate quick cash-not as a long-term solution. Also, receivables factoring companies make their money based on the volume of invoices they purchase. So you may have a slightly harder time finding a factoring company if you have invoices less than $10,000.Forex | Tags: capital, collection, discount, fair, finance, lab August 2013 M T W T F S S « May 1234 567891011 12131415161718 19202122232425 262728293031 Archives
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
Copyright © 2013 Business. All Rights Reserved.