Difference between revisions of "Account For Factoring"
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If you run a small or mid-sized business and extend credit to your customer, then you are obliged to wait for payment until the stipulated credit period is over. Factoring your receivables can bring immediate cash to augment your working capital without increasing your debt burden. This option is especially helpful if your customers demand long credit periods. To factor means to sell accounts receivables to another company, called a "factor." The factor will advance you a major portion of the receivable amount, retain the rest until the account is paid, and then charge you the mutually agreed fee, generally from three to 10 percent. Factoring can be performed with or without recourse, meaning either the buyer assumes full responsibility in the event of nonpayment, or the seller takes some responsibility. Both the process of factoring receivables and reflecting the transactions in the account books may seem to be very complex. By following these steps, you can easily account for factoring. | If you run a small or mid-sized business and extend credit to your customer, then you are obliged to wait for payment until the stipulated credit period is over. Factoring your receivables can bring immediate cash to augment your working capital without increasing your debt burden. This option is especially helpful if your customers demand long credit periods. To factor means to sell accounts receivables to another company, called a "factor." The factor will advance you a major portion of the receivable amount, retain the rest until the account is paid, and then charge you the mutually agreed fee, generally from three to 10 percent. Factoring can be performed with or without recourse, meaning either the buyer assumes full responsibility in the event of nonpayment, or the seller takes some responsibility. Both the process of factoring receivables and reflecting the transactions in the account books may seem to be very complex. By following these steps, you can easily account for factoring. | ||
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== Steps == | == Steps == | ||
