Question

summarize the factoring process

Answer 1

Factoring is generated by credit sales in the business. The main function of factor is realisation of debtors. The factor acts as an intermediary between the seller and the organisation. Company appoints factor agent when the company want to collect the debtors before the credit period.

The process of factoring is as follows:

• The company sells the book debts to the factor and submits a copy of the invoice.
• Factor pays money in advance against the receivables to the company, after deducting an adequate margin that is factor’s commission and interest on advance.
• When the receivables become due, the factor will collect the money from the customer and the advance is settled.