Invoice Factoring

Solve Cash Flow Issues with Invoice Factoring

When a business sends clients invoices for services rendered or products sold, response is not always immediate, and late or non-paying clients can be disruptive in terms of cash flow. These issues can be solved, however, via invoice factoring, whereby the debt is sold to a third party in exchange for an upfront payment. It then becomes the responsibility of the buyer of the debt to track down debtors and extract payment, while the original debt owner is free to pursue other matters.

Invoice Factoring versus Collection

Some may wonder in what way invoice factoring is different to debt collection. In both situations, a third party service provider collects money from debtors, yet with factoring, the money collected is pocketed by the agency which bought it, whereas with straightforward collection the original owner pays the collection agency to collect the money owed, but retains ownership. Depending on the system of payment used by the collection agency, it will either be paid a commission-based fee or will be paid according to another system.