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FACTORING – INTRODUCTION, FUNCTIONS, Get All Notes in Your Inbox

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Factoring is a financial transaction between two parties, client and a factor, Subscribe Now
in which the client sells its accounts receivable (Money owed to client by a We don't spam. We Educate.
buyer) to the factor to receive money immediately in exchange.

Factoring is an agreement in which receivables arising out of a sale of CHOOSE YOUR SUBJECT
goods/services are sold by a firm (client) to the factor (financial
intermediary) as a result of which the title of  goods/services represented Advertising Management (20)
by the receivables passes on to the factor. Articles (240)
Banking and Insurance (10)
Blog (34)
It is an arrangement between a factor and his client which includes any two Business & Entrepreneurship (6)

of the following services provided by the factor to the client – Business Communication (15)
Business Environment (21)
Business Ethics (2)
Finance
Business Law (1)
Maintenance of account
Business Statistics (49)
Collection of debts
Company Law (14)
Protection against credit risk
Computer Applications (9)

Through factoring an organization (client) relieves itself from the Consumer Behaviour (22)
Cost Accounting (3)
procedures and expenses of collecting receivables arising out of a sale and
E-commerce (8)
receives immediate cash to finance its business operations.
Entrepreneurship (11)
Financial Accounting (2)
 
Financial Management (23)
Financial Services (19)
A factoring agreement involves three parties:
Human Resource Management (18)
Income Tax (2)
The Factor, The Client (sells receivables to factor), Customer (pays to International Business (13)
factor) Investment Analysis & Portfolio Management
(10)
Functions of a Factor: IT & Technical Skills (5)
Macro-Economics (9)
Maintaining Accounts – Preparing and updating sales ledger and Management Accounting (5)
providing periodic reports with useful information Management Information System (4)
Providing advisory services – Advices the client regarding credit Managerial Economics (2)
worthiness of a buyer, potential customers, market trends etc. Marketing & Advertising (7)
Providing Short-term Finance – Provide money in advance up to 80% of Marketing Management (18)

the receivables Marketing of Services (6)

Providing Credit Protection – Protects the client against bad-debts/non- Micro-Economics (2)
Operations Management (2)
payment
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