![]() ![]() An invoice factoring company will offer cash up-front by buying an accounts receivables ledger. ![]() This is where an invoice factoring company comes in. Cash flow gaps restrict a business’ ability to cover day to day costs, take on new clients and grow. They must still meet payroll weekly and this wait for their debtors to pay their invoices creates a cash flow gap. The clients have payment terms of 30 days to 60 days which means that the labour-hire business must wait for the cash they are due. These timesheets are then invoiced to their clients. These workers remain contracted to the labour-hire company who pay them weekly based on the timesheets they complete. What is factoring in business? Recruitment and labour-hire - an exampleĪ labour-hire business supplies temporary workers to various firms. Throughout the intervening centuries, it has evolved into the industry that we know today helping Australian businesses manage their debtors and outstanding invoices. In fact, the word factoring comes from the Latin facere. ![]() Whilst the earliest records stretch back 4,000 years ago to the ancient Mesopotamians, it was the Romans who got receivables finance started when they formed and employed the first specialist debt collectors. We’ll outline an alternative to factoring, invoice discounting, and highlight its several key differences below.įactoring comes right out of the pages of history. These terms, however, technically describe the broader category of which factoring is only a specific type. Invoice factoring is often known by various names including accounts receivable financing, invoice financing or debtor finance. In this article, we’ll look in detail at the world of factoring, the pros and cons and its key differences to other types of business finance like a business line of credit. The factor then takes on responsibility for credit control and collection of the debt. Factoring (or invoice factoring) is a type of short-term business finance or cash flow finance option in which a company’s accounts receivable ledger is sold to a third party (or a factor) in exchange for instant capital. ![]()
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