• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • CommentGo Back
Download
 
 ASSIGNMENT OF FACTORING
SUBMITTED TO:-SUBMITTED By:-Prof... Dhiraj SharmaJagjeet SinghJatinder GargMBA 3
rd
(A)
What is factoring?
Factoring is a financial option for the management of receivables.In simple definition it is the conversion of credit sales into cash. In
 
factoring, a financial institution (factor) buys the accountsreceivable of a company (Client) and pays up to 80%(rarely up to90%) of the amount immediately on agreement. Factoringcompany pays the remaining amount (Balance 20%-finance cost-operating cost) to the client when the customer pays the debt.Collection of debt from the customer is done either by the factor or the client depending upon the type of factoring. We will seedifferent types of factoring in this article. The account receivablein factoring can either be for a product or service. Examples arefactoring against goods purchased, factoring for constructionservices (usually for government contracts where the government body is capable of paying back the debt in the stipulated period of factoring. Contractors submit invoices to get cash instantly),factoring against medical insurance etc. Let us see how factoring isdone against an invoice of goods purchased.
Flow Chart of Factoring
 
Characteristics of factoring
 
Factor ClientCustomer 
Pays the amount (In recoursetype customer pays throughclient)credit sale of goodsInvoicSubmit invoicecopyPayment up to80% initiallyPays the balance
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
You must be to leave a comment.
Submit
Characters: ...