{"id":31964,"date":"2015-05-27T10:05:25","date_gmt":"2015-05-27T10:05:25","guid":{"rendered":"http:\/\/vskills.in\/certification\/blog\/?p=31964"},"modified":"2024-04-03T13:17:29","modified_gmt":"2024-04-03T07:47:29","slug":"concept-of-factoring","status":"publish","type":"post","link":"https:\/\/www.vskills.in\/certification\/blog\/concept-of-factoring\/","title":{"rendered":"Concept of Factoring"},"content":{"rendered":"

\"Concept<\/a><\/p>\n

Factoring is a method by which a businessman can obtain cash for invoices he sends to
\nhis customers in respect of supply of goods and services to them. Factoring is also
\ntermed as \u2018Invoice Discounting.\u2019 Factoring involves the sale of receivables to a financial
\ninstitution such as an old line factor\u2014a commercial financial company or one of a few
\ncommercial banks. The factor purchases accounts acceptable to him generally without
\nrecourse; if the customer does not pay, the factor takes the loss. The client no longer
\ncarries factored account receivable on his balance sheet, in effect having converted
\nthem into cash. Firms owing the accounts receivable to client firms are notified that the
\naccount has been sold to the factor and are asked to remit directly to the factor.
\nIt is noteworthy that the factor seldom agrees to buy all of the accounts receivable of a
\nclient firm; instead, he retains the right to screen the accounts and selects those
\nacceptable to him. The client firm can continue to sell to customers whose accounts
\nare unacceptable to the factor, but it must carry them itself and assume all risks on
\nthem.
\nFactoring involves rendering of services varying from the bill discounting facilities offered
\nby commercial banks to a total takeover of administration of the sales ledger and credit
\ncontrol functions, from credit approval to collecting cash, credit insurance and provision
\nof finance. Factoring agreement is normally continuous. As new receivables arise, they are regularly sold to the factor. Under the typical factoring arrangement the client
\nmaintains a running account with the factor.As receivables are sold to the factor, the
\nproceeds are put at the client\u2019s disposal in this account. Often, clients are given the
\nprivilege of overdrawing their account with the factor, or, in effect, of borrowing on an
\nunsecured basis, in addition to drawing against the proceeds of the factored accounts.
\nAlso, interest is normally credited by the factor on funds left with him.<\/p>\n

Click here for government certification in Accounting, Banking & Finance<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Factoring is a method by which a businessman can obtain cash for invoices he sends to his customers in respect of supply of goods and services to them. Factoring is also termed as \u2018Invoice Discounting.\u2019 Factoring involves the sale of receivables to a financial institution such as an old line factor\u2014a commercial financial company or…<\/p>\n","protected":false},"author":625,"featured_media":32008,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_joinchat":[],"footnotes":""},"categories":[1519],"tags":[4012,4010,4011],"class_list":["post-31964","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-banking-and-finance","tag-accounts-receivable","tag-concept-of-factoring","tag-invoice-discounting"],"acf":[],"yoast_head":"\nConcept of Factoring - Vskills Blog<\/title>\n<meta name=\"description\" content=\"Factoring-Factoring involves the sale of receivables to a financial institution. Apply for a Vskills certification in Accounting now. 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