Monday, March 29, 2010

Accounts Receivable Factoring

What is Accounts Receivable Factoring?

In instances where debtors are slow to settle accounts and have outstanding payments, businesses may sell the debt forward to a collection agency in exchange for an upfront payment – this is what is commonly known as accounts receivable factoring. This can be useful for increasing cash flow, and eradicates the problem of trying to extract payment from debtors, as this task now falls to the new owner of the debt.

Accounts Receivable Factoring and Other Solutions

Accounts receivable factoring can be an effective bad debt management solution, but it is only one possible solution. Businesses may also choose to have a collection agency provide outsourced collection services, whereby the business maintains full ownership of the debt and simply pays the collection agency for services rendered. This can also be an effective measure for increasing cash flow and for getting debtors to pay outstanding amounts, and a collection agency which operates on commission can be particularly affordable to hire.