Accounts Receivables Factoring Explained

Managing cash flow can be a major headache for businesses. On the one hand suppliers are asking for payment, and on the other customers owe money. How much easier it would be if customers paid up more quickly.

Finding ways to improve cash flow is a major challenge for many organisations. That’s where accounts receivables factoring has an important part to play. It releases the majority of the cash tied up in unpaid sales invoices, allowing the wheels of business to turn more easily.

‘Cash is King’ goes the popular saying in business, and it’s absolutely true. It doesn’t matter if a business is profitable – it’s in trouble if it doesn’t have enough cash in the bank to pay suppliers or staff.

Cash flow problems can even have a negative impact on organisations who manage to keep up with their financial commitments. Lack of capital prevents investment in new ideas, which in turn restricts business development and growth.

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Accounts receivables factoring in action

Here’s how the accounts receivables factoring process works, from start to finish:

First, you enter into a factoring agreement with a lender. They immediately pay you up to 95% of the value of some or all of your outstanding invoices. That’s an injection of a potentially large amount of cash into your business.

Any new sales invoice that you raise goes through the following steps:

• You send the invoice to your customer and the lenders – some lenders allow online invoice submission.
• The lender pays you up to 95% of the invoice, usually within 24 hours.
• The lender raises statements on the customer and pursues payment.
• Your customer pays their invoice.
• The lender passes the unpaid balance to you, deducting their fees.

The quickest way to find out how much cash you can release from your unpaid invoices is to compare quotes instantly online.

Am I eligible to use accounts receivables factoring?

If you can say ‘yes’ to the questions below, your business is probably eligible for accounts receivables factoring:

• Is your business based in the UK?
• Do you raise invoices against other businesses?
• Is your projected turnover for the next 12 months over £50,000?
• Do you offer your customers credit terms of 30 to 90 days?

We have a panel of factoring experts ready to give you impartial help and advice. If you’re still not sure whether your business is able to make use of factoring finance, why not give us a call now?

How much does it cost?

Accounts receivables factoring is a cost effective way to improve your cash flow and cut your administrative overheads.

The exact costs of factoring will vary depending on a range of issues such as the specific lender you use and the amount of money they advance.  However, there’s no doubt that factoring is an effective way to borrow money and generate cash flow without using any assets as security.

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Also in this section:

• Accounts Receivable Factoring Overview
• Accounts Receivables Factoring Explained
• Release Cash Immediately With Receivable Factoring?
• Factoring Accounts Receivable Benefits
• Arranging Factoring Accounts Receivable with Touch
• Business Receivable Factoring vs Factoring