Scope and relevance of Factoring
Companies in this have a great opportunity to make use of factoring in its financial operations, as written, SMEs for example to meet their capital needs, especially in Member States where access to bank loans is limited. Factoring is attractive for SMEs to sell to large companies with high levels of creditworthiness, the users of factoring are SMEs in the industrial and distribution. Factoring is not suitable for businesses with complex payment models or those with a broad clientele. What is factoring? Wikipedia shows us that the ‘Factoring’ or””””factoring is a financial product that banks or savings offered to businesses. Means giving two services: management and financing charges. Through this operation, a company or merchant contracts with a bank or financial institution to manage all your collections and the advancement of them in exchange for an interest. Factoring is the provision of a set of administrative and financial services performed Factoring Company, a customer (vendor), for billing short term, arising from the sale of goods or services, and that gave the vendor cited the Factoring Company. Consists of the purchase of credits from the sale of goods in the short term. venezuelasite. com suggests that factoring is a financial product aimed at legal entities requiring a line of credit for the cancellation of their bills: account receivable and account payable. our financial services are tailored to the needs you have in your company, because with more cash flow, you could grow your business, take advantage of vendor discounts for early payment, control debt, trade credit, pay, pay payroll, increase the available working capital, acquire new customers, buy more inventory, which in turn becomes more sales, extend your loan terms without affecting their cash flow, reduce unscheduled payments, improve the stability of your business What parts are involved? CAIXAGALICIA. is said that factoring in any operation involving three entities: Factor : Factoring Company or Financial Institution providing services Factoring. Client: Head of trade receivables (invoices) and factoring contracts. Receivable : Buyers of the goods or services the client (seller). Benefits Saves time, saves money, and accuracy of obtaining reports. allows the maximum mobilization of the portfolio of debtors and ensure recovery of all of them. simplifies the accounting, since by factoring the user agreement now has a single customer who pays cash. Sanitation portfolio. Receives advances on receivables. reduces the indebtedness of the employer. No debt: Buy firm and without appeal. can be purchased for cash discounts. managers, saving time spent on overseeing and directing the organization of sales accounting. can be used as a source of funding and resourcing circulating. garantiría bills provide for a loan that the company otherwise would not be able to obtain. Reduce operating costs by assigning the accounts receivable from a company that is dedicated to factoring. inflationary processes provides protection by having the money in advance, with whom he does not lose purchasing power. case of the International Factoring, increase exports by providing a more competitive form of payment. Disposal Collection Department of the company, as is usually the factor accepts all credit risks should cover collection costs. ensures a known pattern of cash flows. The company sells its accounts receivable knows that receives the least amount of accounts Factoring in the commission of a certain date, the planning of the cash flow of the company. Disadvantages High cost. Specifically, the interest rate is greater than the conventional trade discount. factor may not accept some of the documents from his client. excludes transactions relating to perishable goods and those of long-term (180 days). The customer is subject to the discretion of the company to assess the risk factors of different buyers. Factor only purchase the Accounts Receivable he wants, so the selection will depend on the quality of them, ie their term, amount and recoverability. A company that is in temporary financial difficulties may receive very little help. companies engaged in factoring are impersonal, therefore not tolerate that his client fails due to a problem, because it is out of the market About Factoring costs Wikipedia Indicates that the costs are not fixed but are studied in terms of: The characteristics of factoring, if it is with recourse or without recourse. donor characteristics, level of turnover, average amount of invoices, the business sector, number of borrowers, average maturity. The characteristics of the debtor country that is, risk level, age, etc. as a client of the assignor. The interest rate applied to debt reduction (conventional factoring) is set based on the market, plus a margin, such as occurs in trade discount operations. The accrual and payment of such interest shall be made at the time that the assignor receives payment in advance. To CAIXAGALICIA. is, the services offered by factoring and represent a cost or price that has to satisfy himself of the services, the cost consists of two elements: The factoring fee for administrative services performed Factoring Company, which varies depending on the time of payment of invoices. The interest rate that applies when relying on the modality that incorporates the advance of funds. However, the cost varies depending on market conditions (based on 3-month Euribor + differential; the review of final interest rate is monthly) and the risk they assume Factoring Company. Conclusions CAIXAGALICIA. it reminds us that this is a product designed to suit any business or profession and, especially, small and medium enterprises, with this formula, can reduce the workload of the administrative department, outsource the accounting generated by sales and receivables, and advances on the payment dates of the invoices, all this will improve profitability, credit worthiness and financial soundness of the company. is known that the factoring may appear expensive in many companies, compared to banking services, however, also considers the advantages over trade discounts, or other financial alternative, many companies may be surprised if you compare the cost of factoring the cost of banking, considering the trade-offs and deductions that are forced to make to the latter. It should be noted also that factoring will enable the company to reduce its structure, with the cost savings it implies. factoring involves the transfer by the Company of the bills against a client is a financial institution called factor