Both debts towards counterparties and non-collectible receivables form customers are negative signals for business environment and financial institutions. Delays in payments for invoices may lead to the situation in which a company will be soon labelled as unreliable counterparty and it will prove laborious and time-consuming to get rid of it. Factoring may help to change or avoid unfavourable perception of a company.
A reliable partner image is of utmost importance in any trade. A potential counterparty must be sure that it will receives payment for provided service or delivered goods, while not experiencing a loss of financial liquidity. Thanks to factoring, we may quickly unfreeze funds form our receivables or settle our own liabilities.
A company image is of no small importance while applying for a credit. Since banks analyse then receivable turnover ratio and debt to equity ratio and the decision to grant a credit is conditional upon these analyses. Apart from that, better financial outlook involves higher maximum limit of trade credit protection determined by insurers, which also translates into higher credit at suppliers.
Image is particularly important for stock-exchange companies. The more favourable the image, the more favourable the entity is perceived by potential investors, which is not without significance for the value of company’s stocks. Quick improvement in the finances of an enterprise is possible thanks to cleaning up of the balance-sheet, which is an additional option in factoring. The said cleaning up consists in complete repurchase of receivables by an external company.
Efficient management of receivables will allow to build an image of a solid counterparty and facilitate preservation of financial liquidity of an enterprise. Thanks to that, company management and its development remain uninterrupted.
Published on: 14 November 2016