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Factoring

Factoring

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Published by maverick987

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Categories:Business/Law, Finance
Published by: maverick987 on Sep 08, 2010
Copyright:Attribution Non-commercial

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06/27/2011

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TERM PAPERMANAEGEMENT O FINANCIAL SERVICES  FACTORING
SUBMITTED TO:-SUBMITTED By:-MR. Sanjay Medhavi Alok AryaM B A – 3
rd
Sem
 
What is factoring?
Factoring is a financial option for the management oreceivables.In simple definition it is the conversion of credit sales into cash.Infactoring, a financial institution (factor) buys the accountsreceivable of a company (Client) and pays up to 80%(rarely upto90%) of the amount immediately on agreement. Factoringcompany pays the remaining amount (Balance 20%-financecost-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 accountreceivablein factoring can either be for a product or service. Examples arefactoring against goods purchased, factoring for constructionservices (usually for government contracts where thegovernment body is capable of paying back the debt in the stipulated periodof 
 
factoring. Contractors submit invoices to get cash instantly),factoring against medical insurance etc. Let us see how factoringisdone against an invoice of goods purchased.
Flow Chart of Factoring
 
Factor ClientCustomer 
Pays the amount (In recoursetype customer pays throughclient)credit sale of goodsInvoiceSubmit invoicecopyPayment up to80% initiallyPays the balanceamount

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