Advantages of Selling Accounts Receivable
When a company offers customers a credit term, they agree to provide the goods or services today in exchange for payment in the future. Because the company agrees to postpone the payment, they receive a premium, known as interest, from the customer at a future date. This process allows businesses to keep their prices competitive while offering customers a convenient way to pay for their purchases over time. Unfortunately, situations arise that prevent customers from paying for their goods and services on time. By missing payments, they prevent a company from accessing the cash from the sale to produce more goods and services, putting them in a bad financial position. By selling accounts receivables to an invoice factoring company, businesses can get the cash they are owed quickly and conveniently without the need to hassle customers for cash. Most small to midsized businesses don't have an established collections department, and the best factoring companies will provide the collection service at no cost.
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