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Invoices Factoring – Financing Your Business Cash Flow

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Problems in the company usually come from the wrong money management. The wrong money management that can’t be handled will result a bad condition for the company. If you want to do the money management right, you can either make sure you or one of your employees have an accounting degree, such as one from Bryant & Stratton http://online.bryantstratton.edu/bba-accounting/ ; or you need to find a company that engage in buying invoices. This could ease some of the problems in the companies that related to money management, for example, they don’t have enough cash to pay employees, buy some materials, or paying their debts to the bank.
business audit
Buying invoices, these usually called Factoring, will buying invoices from other company in a discount price, and take the responsibility to collecting the due payments. Using this process, both companies will reap good benefits. The company who has invoices could get necessary funding, and the invoice buyer could make nice profits from it.

So, how this works actually? Get ready for a little financial talk now, to make things clearer. Well, the invoices that are due are required to pay fees starting from 1.67% of the total amount for every ten days since the last payment term. So, when you have an invoice that is due in 30 days, the invoice buyer could buy it from you and ask 5% discount from it. This 5% will be their profits when they get back their investment. The amount of fees will be depends on the creditworthiness of your debtor, and not you. So, the company who has a good reputation in paying their debts on time will give you a better deal than a company without a strong credit.

Invoice financingUsually, the company that will buy invoice from you will limit the amount of total invoices that you have not more than $100,000. They don’t have any minimum. So, if you have, for example, $200,000 invoices at hand, it doesn’t mean that you can’t sell them. They could still take your invoices by paying you several thousand dollars upfront, and pay the entire amount after they collected it.

Buying invoices or Invoice Factoring will make at least three parties involved. The first is you, the invoice seller. Second is the company who owes you money, and third is the invoice buyer. The third parties could be separated funder or broker, individual, or company. The broker will have the tasks to arrange the agreements and facilitating your receipt. The funder is the person who actually has the money to buy invoices. So, the broker who doesn’t have any money involved will arrange the agreement and the invoice buyer who has the money will pay you for the invoices.

The funder who buy your invoices usually get a higher share because they use their own money while the broker will get a smaller share at least 10% of it because they arrange the agreement.

financing relationshipIf you ever dealing with a buyer invoice, you need to build a very good relationship with them. Because when you found yourself facing a financial problem in your business and need a fast cash to fix it, you could contact them and offering your invoices. These people prefer to dealing with companies that they already worked and successful from than other new companies that contacting them. They also would offer you a favorable terms for it.

The companies or individual who buy invoices usually have lots of money at hand. You could find a lot more invoice buyers overseas, especially from cash rich companies in Middle East as the economy is fast expanding over there with rich natural resources.

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