magnoliafinance

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Improving the Cash Flow of the Company

The debt factoring or invoice financing is an alternative to obtain financial resources that are oriented preferably to small and medium business. It consists of a contract whereby a company transfers the service of future collection of the credits and existing invoices to its favor and in exchange it obtains of the immediate way the money to that those operations refer, although with a discount.

For example, a Company X has made a sale and therefore has an invoice to be canceled at 60 days for a value of 10,000 dollars, through the respective contract is delivered to the factoring company or the bank, which gives it immediate an amount of money equivalent to 90% of the invoice. When the 60-day term is met, the factoring company or bank will charge the original invoice, for the total amount, to the client who will pay directly and not to Company X who gave him the invoice, so the difference will be their profit.

The invoice financing allows the company to discount its invoices and quickly improve its cash flow in the short term. Instead of waiting 30-60 days or more to receive payment from your customers, the invoice financing allows your company to receive payment as soon as in 24 hours.

The invoice finance Sydney procedure is relatively simple. The customer orders a product and the company generates an invoice for that sale. To improve its cash flow, the company presents that invoice to the financial institution and receives immediately (24 hours) a percentage of the total amount of that invoice, instead of waiting for 30, 45 or 60 days to obtain the money. The financial entity proceeds, upon the expiration of the due date of the invoice, to collect the entire amount expressed on the invoice.

In addition to what invoice financing represents for cash flow, there are other benefits, such as:
• Collection management and internal support services (back-office) are included in the service package.
• Credit assessment services are also included to help you assess the creditworthiness of your clients.
• The financing of accounts receivable is based on the solvency of your customers, not on the financial results of your company.
• The financing of accounts receivable is not a loan and does not appear as a debt on your balance sheet.
• qualify for additional financing options, access discounts for prompt payment and much more.

The financing of accounts receivable can help with the growth of your company. By receiving faster payments, you will be able to release the pressures caused by payroll obligations, qualify for additional financing options, access cash discounts and much more.

The invoice financing is used by companies whose clients take 30, 45, 60 days or more to pay their bills; Companies with rapid growth and high demand for working capital in the short term; Or companies with large fluctuations in sales who use debt factoring to stabilize their capital flow.
2017-12-17 23:40:36, views: 269, Comments: 0
   
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