1. Outsource Your Account Receivables, Use Factoring
A company can fund its operations through accounts receivables by having another company take care
of their accounts receivables. Accounts Receivable Factoring is a method of financing which is less costly
and that reduces the risk of non-fulfillment. Provides many benefits that stem from the costs that the
company saves by not handling their own credit operations. There is no cost of collection to Accounts
Receivable Factoring, since there is an agent to collect the accounts, no cost of credit department, as
accounts and wages, the company can avoid the risk of default if it decides to sell the accounts without
responsibility, although this is generally more expensive, and can mobilize resources quickly and
practically without any delay cost.
Receivables Funding Corporation
Accounts Receivable Factoring companies may also provide other services additional to the standard
collection. They give you reports and keep accounting records of their work. They may even do risk
assessments that would allow companies to understand what customers are more expensive than
others. You benefit from this because you could take measures by improving your credit lines. Accounts
Receivable Factoring are also responsible for transferring the funds. All funding sources have both
advantages and disadvantages; AR Factoring is no different. On the one hand, it represent a lower cost
to the company hiring factoring services than taking care of that themselves. In order to have a
collection department up and running you need to pay wages and hire people. However, Accounts
Receivable Factoring is not exempt of disadvantages. The most important one is the one that has to do
with the non-fulfillment of the contract. Factoring companies may take legal actions when this happens.
If you have not understood how Accounts Receivable Factoring work let us clarify it. When a company is
overburden by accounts receivables and sells them to a company (a factor), this company will become
responsible for their collecting and giving the company its money back. Customers are instructed to pay
their bills directly to the agent or factor, which acts as a credit department of the company. When the
factor receives the payment, the agent retains a fee for their services and pays a percentage given to the
rest of the company. Most accounts receivable are purchased with corporate responsibility, which
means that if the agent fails to recover them, the company needs to repay the amount either by cash or
replenishing the uncollectible accounts by other more viable.