Thursday, October 8, 2009

Invoice Factoring

What is Invoice Factoring?

Many business bill customers and/or clients on a month-to-month basis, and send out invoices on a set date. Debtors do not always pay on time, however, and invoice factoring is a solution for settling bad debt easily. Invoice factoring entails selling a debt to a third party debt factoring service provider, in exchange for payment upfront. This can be useful for boosting cash-flow and leave debt collection to the invoice factoring company.

Other Debt Handling in Addition to Invoice Factoring

In addition to invoice factoring, it is also possible to make use of straightforward debt collection, whereby a collection agency collects debts on a company or individual’s behalf. The agency’s client retains ownership of the debt, and can recover debts in full (minus the fee which is charged by the debt agency). When using debt collection, it is important to use a collection agency which charges commission rather than a retainer, as collection success can be inconsistent due to non-cooperation of debtors, and thus it is best to use a system where only successful collections are paid for.