We have already been writing about the fact that sale of payable receivables is a way for fast inflow of cash in the text: Payable receivables as a method for cash. When the company loses its financial liquidity due to non-timely payment of receivables by the customers, sale of the debt is an effective and rapid way to repair the company finance.
The entrepreneurs know what the sale of the debt is, what benefits it brings and when it is the best to sell the debt in order to get the highest price inter alia from the text: When to sell the debt in order not to lose?
Non-timeliness or failure to pay the receivables by the business partners are not the only reasons for financial jams in enterprises. The companies from almost every industry know the situation when apart from the price and from the general cooperation terms & conditions also the payment term decides on the establishment of the trade exchange. The longer the better – of course for the customer. For this reasons, the entrepreneurs – in order to keep the advantage in the competitive market environment – sell their goods and services, providing trade credits to their customers. The payment terms of several weeks and longer disturb the financial liquidity. In this way the companies, in spite of sales, struggle with permanent deficit of cash. In such cases, it is worth remembering that it is also possible to cash the non-payable invoices, i.e. the ones, the payment term of which has not expired yet.
If the company needs cash immediately, it may sell the receivables still before their payment term. Such transactions may relate to individual receivables and are usually not connected with the need for permanent cooperation. They allow for recovery of the cash before the payment term. For the company, it means the possibility of flexible management of financial liquidity, defrosting of the working capital at any time and according to the ongoing needs of the enterprise.
Sale of receivables is a universal tool that is used also by companies having relatively good financial situation and which only incidentally need cash immediately. An additional benefit resulting from the sale of receivables is the possibility to clean the balance sheet, which we have been writing about in the text: How and what for to clean the balance sheet. If the company lacks cash, it is worth remembering that receivables are highly-liquid assets. The fact that the business partner is not able to pay us at a given moment does not mean that we cannot recover the money.
Published on: 20 February 2015