What is invoice factoring? Can someone help me figure out what the heck invoice factoring is?
Oh man, timely question. I’ve been looking into the topic of invoice factoring recently and it’s not that difficult to understand. Visit http://www.receivablesmanagementset.com/… that place should get you started. You might also email admin@http://www.receivablesmanagementset.com (presumably the webmaster and author) to get more answers. Good luck to you!
A company when it sells a product produces an invoice. the invoice is actually a proof of purchase of another company and serves as a document that the product was delivered and accepted by the buyer. There are purchases that are purchased by a customer on terms. Meaning the buyer will pay the merchandise after 30 days or so based upon the agreement of the buyer and the seller. The terms of the purchased as well as the amount is recorded in the invoice. Some companies when they are low in cash can factor these invoices. Meaning they sell the invoice to a third party who in turn will collect from the buyer the amount in the invoice when it falls due. The purchase price of the third party that is buying the invoice is definitely lower than the amount in the invoice. In short the company can convert the invoice to cash and wont wait for the terms stipulated in the invoice it is like having your money now lower than the invoice price rather than wait for 30 days.
