Many companies considering using accounts receivable factoring are worried that their customers will perceive them as "going under". This is a concern with most prospects that are unfamiliar with factoring. The issue centers around notification and collection. At the inception of a factoring relationship, each account debtor is notified that a secured party (the factor) has taken title to invoices in which they owe payment. The letter also states that all present and future invoices due must be paid directly to the factoring company until otherwise notified by the factor. This is necessary to do this because if protects the factor's collateral and to be protected by the UCC.
Many business owners worry that they will be perceived in a negative light when the customers get these notices. There is no reason to worry. Factoring is hardly a new form of financing. Many industries (manufacturers, distributors, apparel & textile, trucking, and temporary staffing) rely on the services a factor provides. Factors only interact with customers on a random basis, mainly at the inception of the relationship.
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Need a quick infusion of cash? Click here to apply for a factoring quote.
Kent Harlan, CPA
www.ocflink.com
kenth@ocflink.com
417.849.7394
April 5, 2008
Customer Perceptions About Invoice Factoring
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5 comments:
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Based on their calculation norms, the concerned company finalizes the actual worth of your receivables and is willing to pay a certain percentage of the evaluation for it. This specific discrepancy is known as discount value. Generally as the standard norms goes, account receivable factoring companies pays you 90% of the payment up front. The balance payment is delivered after the actual customer clears his dues.
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