7.Cost of factoring=finance cost + operating cost. Factoring cost vary according to thetransaction size, financial strength of the customer etc. The cost of factoring vary from1.5% to 3% per month depending upon the financial strength of the client's customer.8.Indian firms offer factoring for invoices as low as 1000Rs9.For delayed payments beyond the approved credit period, penal charge of around 1-2% per month over and above the normal cost is charged (it varies like 1% for the first monthand 2% afterwards).
FUNCTION OF FACTROING
MAINTENANCE OF SALES LEDGER: -
A factor maintains sales Ledger for his client firm. An invoice is sent by the client to thecustomer, a copy of which is marked to the factor. The client need not maintain individual salesledgers for his customers. On the basis of the sales ledger, the factor reports to te client about thecurrent status of his receivables, as also receipt of payments from the customers and as part of a package, may generate other useful information. With the help of these reports, the client firmcan review its credit and collection policies more effectively.
COLLECTION OF ACCOUNTS RECEIVABLES-
Under factoring arrangements factoring institution undertakes the responsibility of collecting thereceivables for its client. Thus, the client firm is relieved of the regours of collecting debts andthereby is enable to concentrate on improving the purchase, production, marketing and other managerial aspects of the business. With the help of trained manpower backed by infrastructuralfacilities factoring agency systematically undertakes follow up measure and makes timelydemand in the debtors to pay the amounts.
Credit control and credit protection
Dr. S. PANDIYAPage 3