Invoice factoring is normally handled by a group of people called factors. Factors as they are called help you draw money again your sales invoice. As you might have realised, a lot of make their payments through invoices. The cash way of payment is long gone and for accounting purposes invoicing is necessary. Every business whether big or small always have to put their accounting in order to enable them in evaluating the kinds of progress their business is making. As a customer or a supplier a lot happens that suppliers and customers rarely get to know in any business setting.
On many occasions when funds delay in coming and there are bills to be paid, companies are faced with the option of seeking help in making such repayments. Simply stated, the factoring companies which are now on the increase the world over buy your invoices for cash. It is then their duty to do all the collection of the invoices with permission of your company. Once they buy your invoices, they will pay you a maximum of between 80 to 90% percent of the amount in question. It is an easier and effective way of ensuring that your bills are paid in time.
As you employ the invoice factoring method you must be ready to meet the extra charges that come with it. Factors always have a flat rate on the fee factored. You also need to know the longer the invoices to be paid the expensive it gets. A factoring fee of 3% is normally charged upon the purchase of the invoices by the factors as they are called. There are important facts worth noting as you sign the agreement with the factor company. It is worth taking note that factoring does not take percentage of all the invoices you own. They only charge percentage of the invoices they have paid.
There are greater advantages that you can enjoy with factoring. Firstly, there are no extra hidden costs incurred. All the agreement is done at the signing and the invoices unless otherwise, do not earn interest. Since now the invoices now belong to them all the following and reminders are left to them. They too are a company in business but if you do not want your customers to deal with them you can arrange with them in advance. A lot of customers prefer not to deal with third parties when it comes to financial dealings of any kind.