Factoring Invoices Less Than 90 Days Old

Some firms have a business model in which they don't get paid by their customers until 90 days or more after invoicing occurs. For those businesses, factoring is not a viable financing option. Accounts receivable financing is only for businesses that issue thirty day net term invoices and have a history of getting paid on time. That doesn't mean each invoice every single invoice must be paid within 30 days. But it is important that the accounts receivable turnover occur at a reasonable level. That is critical for both the client and the factoring company. For the client, excessively late payments (over 60 days) can be very costly in terms of fees. For the factoring company, their line of credit may be hampered.

Most factoring companies get their funds from a bank credit line. They then use those funds to advance cash to factoring clients. The bank considers invoices over 90 days to be a non-performing asset and deducts those amounts from their credit line. That's why factoring clients must replace those invoices over 90 days with ones that are current.

Invoice factoring is an excellent means of achieving capital infusions. Making sure your customers pay in a timely manner helps maximize cash flow and keep factoring fees under control.
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Kent Harlan, CPA
Ozarks Capital Funding, LLC
www.ocflink.com
kenth@ocflink.com
417.849.7394