when
a company is struggling to get in money from customers on
credit accounts or who have been issued with invoices but
are slow to pay. Slow payment of bills is a large problems
many companies hold back payments to increase their cash flow.
In extreme cases slow payment of debt can potentially mean
that a company will go bankrupt. The out sourcing of factoring is becoming more popular as it can be seen as potentially an economical way of collecting monies outstanding without having to employ a new member of staff for the task. It is also a way to potentially fund company growth especially if a small company is growing quickly. This means that some business coachs and mentors are recommending it in some circumstances as a good choice. Factoring is normally dealt with banks or private factoring companies. Factoring
works by a high percentage of payment say 90% of the invoice
being supplied when the bill is issued for payment due. The
factoring company will then chase the payment and charge their
customer the company a percentage of the invoice amount or
have a fixed price relating to the number of invoices raised.
Due to cash flow being made more reliable the business can
then potentially plan for the business with more accuracy
and confidence. |
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