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Is Accounts Receivable Financing You

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					Is Accounts Receivable Financing You?
Accounts receivable financing is a term many of us hear but rarely understand. We know
accounts receivable refers to money that is to be collected by a company from clients who have
unsettled accounts. But accounts receivable financing is different in that it happens when unpaid
invoices are sold to companies which specialize in this business. These companies will then take
on the responsibility of collecting money using these invoices. There are businessmen who turn
to this as a solution for accounts that have long been unsettled. However, not all types of
businesses are suited to this type solution. If you have a problem with your collections, you can
review what accounts receivable financing is and gauge if it is, indeed, for you.

An advantage of accounts receivable financing is that you are able to pass on to another company
so you can concentrate on other important tasks to run your business. Instead of spending time
with a client who somehow cannot pay, you can focus on selling or marketing your products or
services, for example. You can let another company worry about these collections so you can
move on with other urgent tasks so you can compensate for whatever loss you incurred from not
having settled issues with outstanding invoices. This also lets you use capital, which you would
otherwise use for inventory, on other aspects of your business.

Factoring also lets you bring in quick money because this will not need any tax statements. This
becomes especially useful when you are currently experiencing financial difficulties. When you
sell outstanding invoices, you can easily make money out of it to add to your capital and you
don't need a business plan for this.

There are more considerations you should make before you engage in factoring. You will lose a
certain amount of money when you engage in factoring, you have to carefully examine whether
or not this solution is actually needed by your company. Is the cost of keeping these outstanding
invoices greater than the cost of selling them to accounts receivable financing? When you do
decide to sell those invoices to another company, you also have to think whether or not this will
be in line with your business plan. Depending on the specific circumstances, selling those
invoices can lead you into two directions - improving your business' standing or bankruptcy.
Remember that this industry is not very stable or predictable.

				
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posted:12/31/2010
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