Accounts Receivable Financing and Accounts Receivable Factoring are two terms that are interchangeably used, but there is a major difference between them. Although both refer to the concept of extending cash to an owner of a business in lieu of invoices and other Accounts Receivable, there are differences, no matter how subtle.
First of all, Accounts Receivable Financing is a loan in which the invoices are used as collateral. But this not the case with Accounts Receivable Factoring. Accounts Receivable Factoring is not a loan. It involves the selling of the invoices to the financing company at a rate less than the face value of the invoices. The financing companies then collect the money at the full face value from the clients. This means the business no longer has the responsibility of collecting the money.
But this is not the case in Accounts Receivable Financing. The process of Financing involves the extension of an advance on the percentage of each invoiceï¿bf½s amount. Also, the responsibility of collecting the money remains with the business house.
Both Account Receivable Funding and Financing companies charge additional fees for services rendered, but in case of Account Receivable Factoring, the fees charged are comparatively higher. This is mainly because the entire responsibility of collecting the money is with the financing company.
Companies providing Account Receivable Financing step in and work with companies who cannot get loans otherwise. Account Receivable Factoring, on the other hand, proves useful to business houses urgently in need of ready cash flow.
This said, both Account Receivable Factoring and Financing prove extremely convenient to companies who urgently require a cash flow to keep their business going.
Related Articles of Interest :
-
Accounts Receivable Factoring
10 August 2010 8:30 PM |
No Comments
Accounts Receivable Financing and Accounts Receivable Factoring are two terms that are intermittently used, but there is a major difference between them. Although both refer to the concept of extending cash to an owner of a business in lieu of invoices and other Accounts Receivable,...
-
Accounts Receivable Factoring Companies
10 August 2010 8:30 PM |
No Comments
As an owner of a company, you may have felt frustrated because your cash is tied up in fixed inventories and so you don’t have enough cash flow to energize your business. And keeping track of the invoices and the slow payments may distract you...
-
Accounts Receivable Jobs
10 August 2010 8:30 PM |
No Comments
Accounts Receivable Factoring is a process by which a small business sells its invoices at a discounted rate to a financing company. The business gets the cash required for the smooth flow of the business. It then becomes the responsibility of the financing company to...
-
Accounts Receivable Management.
10 August 2010 8:30 PM |
No Comments
Accounts Receivable Factoring is a means to meet the requirements of companies that are in urgent need of cash. Highly useful to the companies, this process of Accounts Receivable Funding refers to the process of selling of invoices and other Receivables by the company to...
-
Accounts Receivable Software
10 August 2010 8:30 PM |
No Comments
To understand the utility of the Accounts Receivable Software, you need to first understand the concept of Accounts Receivable funding. Invoice factoring, as Account Receivable funding is also called, is a financial service that allows a business to sell its invoices and outstanding receivables to...
-
Accounts Receivable Collection
10 August 2010 8:30 PM |
No Comments
Accounts receivable factoring refers to a process in which you can sell your invoices to a financing company for a rate, less than the face value of the invoice sold. The responsibility of collecting cash against the outstanding receivables lies with the financing company, who...
-
Accounts Receivable Outsourcing
10 August 2010 8:30 PM |
No Comments
Accounts Receivable factoring is a process that enables a small business to sell off its invoices and other Account Receivables to a financing company. The financing company purchases these invoices at a discounted rate, gives the cash to the business and, when the due date...
-
A Guide To Accounts Receivable Outsourcing
10 August 2010 8:30 PM |
No Comments
Many businesses must decide whether to depend on their in-house workforce or seek out other resources in order to ensure growth and profitability. In many cases, if the core strengths—manufacturing, marketing, etc.—are inherently dependable, many companies will opt to outsource responsibilities, such as accounts receivable...
-
Accounts Receivable Training
10 August 2010 8:30 PM |
No Comments
For those embarking on careers in business accounting, it pays to take accounts receivable training. In fact, it’s essential for management trainees, systems analysts, and other business professionals to upgrade themselves and be in a better position to understand the accounts receivable aspect of business...
-
Accounts Receivable Process
10 August 2010 8:30 PM |
No Comments
The process of accounts receivable starts when products or services are provided to a customer on credit. The company that details the transaction including the total amount and duration of credit creates an invoice. The invoice is then recorded. If payment is on time the...