The best way to define factoring is as a business involving a regular relationship between both the factor and the business, and deals with concerns such as selling goods and services to trade to other customers whereby the factor will purchase the clients accounts and there for control the credit extension of the customer and administers the ledger of sales.
Having an outsourcing accounts is one of the best ways to reduce a company’s overhead cost and help improve the quality and flexibility within short time period. Outsourcing your accounts can be a very good way to go in carefully handling your company’s receivables perfectly and securely.
What does Accounts Receivable Services do?
Focus on core business activities
Escalating/alerting short payments
A way of using invoices raised to prepare cash flow summary for the past and future.
Most of a company’s accounts receivable are generally trade receivables, representing the sales of product on account (as opposed to ‘cash sales’ or sales made while proceeds are simultaneously collected)
Companies that carry receivable accounts always experience a certain percentage level of their accounts normally wind up not paying. Now, typically this will be a result of liquidity problems and or complaints about purchased products. The results generally include different components which are in anticipation to a non-collection ratio, and this is basis-ed on a historical trend.
Bad debt is typically what you’ll see on the account balance receivable balance sheet. This is typicality called ” Account Receivable, Net” the meaning of this is gross receivable, net of the allowance provided, all of this will be shown in your current assets sections.