he 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.

To understand how this works, it is first necessary to understand what is meant by these statements. For any business today, there will be goods and services sold on credit, any kind of credit. Before these payments are settled, the company will be holding invoices for the services or goods. It is these invoices that are referred to as accounts receivable.

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.

As with any other business, dealings, it is wise to deal with an established company which is respectable. It should be registered to operate in that area, or else you can lose your money. These checks and balances are in place to safeguard businesses from dealing with fraudulent companies, companies that engage in fraud and may walk away with your cash.

Another form of this type of transaction his called the maturity factor. In this case, no advance is paid at all.Both parties wait until around the time the invoices are supposed to be settled, and then the full amount is paid by the factor. This means that the factor acts almost like a collector for the amounts, since the time period between payment and collection is very short.

A close look at this operation reveals that it is very different from a bank loan, which people sometimes confuse it with.Consider that in this articular case, the amount paid is the amount expected from the accounts, therefore it is an asset. If you take a loan from a bank, all assets of the business will be liable for use as collateral.

Therefore, it is clear that accounts receivable – factoring is a reliable way to get cash for a business. Businesses frequently employ it so that they can focus on their core operations. It is fairly simple, and is usually completed very fast.

Unique financing solutions including factoring and purchase order financing be customized to your business\’ needs. Contact Accutrac Capital Solutions today to get started!

Unique financing solutions including accounts receivable and purchase order financing be customized to your business\’ needs. Contact Accutrac Capital Solutions today to get started! http://www.accutraccapital.com/

Author Bio: Unique financing solutions including factoring and purchase order financing be customized to your business\’ needs. Contact Accutrac Capital Solutions today to get started!

Category: Finances
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