Apart from financing, factoring mean – first of all – increased security of concluded contracts involving the sale of goods or services. For many entrepreneurs, the mere possibility of checking customers by the factor or controlling the payer before expiration of payment deadlines stated in invoices is a considerable security. When choosing recourse factoring, we must take into account the possible refund of capital on a recourse basis. It means that in case the customer does not pay for the invoice, the factor will have recourse to the entrepreneur to ask it to pay back the funds. Consequently, such solution is effective when we are sure the customer will not delay its payment.
Another option involves combined factoring and debt collection. If the factor does not receive the overdue amount within 30 days after its validity expires, the recovery procedure is initiated, at the price corresponding to about 4-5% of the amount of receivables. Entrepreneurs tend to delay with initiating debt collection activities against their customers. Whereas, time plays an extremely important role there! A professional factor acts quickly. Thanks to that it is effective in its actions. Summing up – the sooner the receivable is to be recovered, the greater the chance to recover it.
Provident entrepreneurs are advised to use an insured transaction option. It generates higher costs of the service, but ensures peace of mind of the entrepreneur, if its customer proves unreliable. A non-recourse factoring means that in case of invoice that was not paid in due time, the factor cannot have recourse to the company that uses its factoring services.
Other alternative solutions one can use in factoring services is the so-called cleaning up of the balance-sheet, i.e. a one-off repurchase of receivables by a factoring company. Such practice makes it possible to close an analytic account and limit tax liability. An entrepreneur may freely use the recovered funds, at the same time improving its indexes: the receivables turnover rate, debt to equity ratio or return on assets ratio.
It is worth to look at factoring from many different perspectives. It offers a very wide range of services and possibilities. Thank to that the offer if very flexible and may be easily adjusted to our needs.
Published on: 14 November 2016