collecting accounts receivable collecting accounts receivable

Collecting Accounts Receivable

Collecting accounts receivable or invoices is done by a factoring company. The job of a factoring company is to collect the invoices of a company in need of immediate cash and provide them with cash. Collecting money from the clients is also the problem of the factoring company.

Collecting accounts receivable in return of cash is a financing concept where receivables or invoices are sold for immediate cash. Collecting accounts receivable financing fees may vary from one factoring company to another factoring company and from client to client. They are determined by a combination of your customer base creditworthiness, average payment cycle, invoice size and factoring volume.

Collecting accounts receivable by factoring companies provides over 100 billion dollars to industry each year. In fact, it is an old financial service used by multi-billion dollar corporations that is now available to smaller sized businesses to which banks are reluctant to lend funds. The factoring companies by collecting accounts receivable and providing cash fill the tremendous void that banks have created.

Accounts receivables financing is collecting accounts receivable or invoices representing money due from the customers and selling them, to a factoring company, at a discount from face value so that it does not have to wait the normal 30-45 days for its accounts receivable to be paid. In short, invoice financing helps a company speed up its cash flow, thereby enabling it to more readily pay its current obligations and grow.

Many new and growing companies have trouble obtaining traditional bank financing due to their length of time in business, profitability or financial strength. Factoring company by collecting accounts receivable allows these companies to convert their invoices into instant cash. Once you have delivered your product or service and generated an approved invoice, you can get your money in as little as 24 hrs. Through collecting accounts receivable a factoring company can help a company stay current with its vendors and other financial obligations such as payroll and taxes.

Other types of financing generally require two years in business and showing a profit. With collecting accounts receivable financing you do not have this limitation. Young, growing companies or those with tax liens and even bankruptcy can still qualify for accounts receivable purchasing lines.

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