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Here we present you a few of the services that Factoring companies provide.
Factoring companies are in charge of the administrative management of the accounts receivables you provide, and also their collection.
Coverage of the risk of unpaid if the debtor proves to be insolvent. The factoring company will pay the exporter the amount of the bill by drawing on its own funds. However, it can not provide unlimited coverage. That is why after a study of solvency, it will set for each debtor a limited coverage.
For instances, Factoring companies can give you a percentage of the total or partial amount of the contracted accounts receivables. This amount can be up to 85%, and your company would use it as funding that increases the working capital directly. With this funding, your company will be able to finance other daily pressing responsibilities or invest in assets. Once the customer pays the bills, the credit will be considered as covered.
One of the positive aspects of factoring is the fact that it can absorb the fluctuations of currency when the company works in exporting.
Some companies decide to keep either one of these two services. Some will do this because they can fulfill the other benefit with their own funds.
Factoring companies have different rates depending on the portfolio of each customer. Some of them. Some of them will charge from 0.5% to 2.5% of the total of the bills submitted as a fee. The criteria factoring companies use to determine the rate can depend on different factors:
First, Factoring companies will identify what are the administrative costs that they would incur when collecting the accounts receivables. These costs are reduced when the customers have a high likelihood of paying back. When the company deals with exporting, Factoring companies will also consider the number of countries and clients contracted. The more Accounts Receivables, the lower the fee the Factor will request. The formula they use is also a crucial matter to determine the fee.
To this commission, it must be added the cost of funding for early payment of claims. This cost depends on the market rate and duration of recovery of the claim by the company.
When establishing the real cost of factoring to your company, you should not only contemplate what you spend in factoring, but also what you save from it. Factoring saves you money in the collection process, and also in some administrative and accounting tasks. These factors should always be considered.
Factoring companies are in charge of the administrative management of the accounts receivables you provide, and also their collection.
Coverage of the risk of unpaid if the debtor proves to be insolvent. The factoring company will pay the exporter the amount of the bill by drawing on its own funds. However, it can not provide unlimited coverage. That is why after a study of solvency, it will set for each debtor a limited coverage.
For instances, Factoring companies can give you a percentage of the total or partial amount of the contracted accounts receivables. This amount can be up to 85%, and your company would use it as funding that increases the working capital directly. With this funding, your company will be able to finance other daily pressing responsibilities or invest in assets. Once the customer pays the bills, the credit will be considered as covered.
One of the positive aspects of factoring is the fact that it can absorb the fluctuations of currency when the company works in exporting.
Some companies decide to keep either one of these two services. Some will do this because they can fulfill the other benefit with their own funds.
Factoring companies have different rates depending on the portfolio of each customer. Some of them. Some of them will charge from 0.5% to 2.5% of the total of the bills submitted as a fee. The criteria factoring companies use to determine the rate can depend on different factors:
First, Factoring companies will identify what are the administrative costs that they would incur when collecting the accounts receivables. These costs are reduced when the customers have a high likelihood of paying back. When the company deals with exporting, Factoring companies will also consider the number of countries and clients contracted. The more Accounts Receivables, the lower the fee the Factor will request. The formula they use is also a crucial matter to determine the fee.
To this commission, it must be added the cost of funding for early payment of claims. This cost depends on the market rate and duration of recovery of the claim by the company.
When establishing the real cost of factoring to your company, you should not only contemplate what you spend in factoring, but also what you save from it. Factoring saves you money in the collection process, and also in some administrative and accounting tasks. These factors should always be considered.
About the Author:
Wade Henderson - very Professional - 15 yrs in the Business Finance Field - reputation for getting the deal done. IMMFinancial.com accounts receivable software accounts receivable collection Get a totally unique version of this article from our article submission service
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