Rutuparnad
Self Employed
+2 Others

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Hi All,
I'm currently working with Advertising and Designing organisation.
Recently I came across a concept called FACTORING.
I would like to know exactly how this works and will it be beneficial for service organisation like mine.
Regards,
Rutuparna

Factoring iactoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) at a discount. Factoring differs from a bank loan in three main ways. First, the emphasis is on the value of the receivables, not the firm’s credit worthiness. Secondly, factoring is not a loan – it is the purchase of an asset (the receivable). Finally, a bank loan involves two parties whereas factoring involves three.s a financial transaction whereby a business sells its accounts receivable (i.e., invoices) at a discount. Factoring differs from a bank loan in three main ways. First, the emphasis is on the value of the receivables, not the firm’s credit worthiness. Secondly, factoring is not a loan – it is the purchase of an asset (the receivable). Finally, a bank loan involves two parties whereas factoring involves three.

In india these activites are done by banks and its sister concern. like SBI Factors and Commercial Services Pvt Ltd (SBI FACTORS),canbak factors ltd,global trade finance ltd.etc.


you may use this funda if u have large no. customer like bank have credit card customer and u need fund to collect urgently .

However this concept is not so much papular in inda , as commercial banks think factor companies are compitators and banks have huge transaction cost than factoring co.

Pls tell me if any body eagar to know more about factoring and its accounting and financial treatment.....
Factoring is outsourcing of companies receivables and giving some charges to outsource partner for managing that, it helps in reducing cash cycle in com. in org. where large no of customer base is involved factoring helps in managing cash flow like banks, telecom etc.
Plz never take concepts an impose on org., but always see which activity is redudant in org cut that and activity which is labor intensive try to utilise some smart flowchart to overcome that. see where value can be added in system by addressing roots causes. :)

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