What is meant by Factoring?
Factoring is a financing method in which a company sells its outstanding receivables from goods deliveries or services to a factoring provider (factor). The factor pays the invoice amount to the company immediately and takes over the collection of the receivable from the customer. This improves the company's liquidity and reduces the risk of payment defaults.
Typical software functions in the area of "Factoring":
- Receivables Management: Recording and managing open receivables.
- Credit Assessment: Automatic checking of customers' creditworthiness.
- Invoicing: Creation and sending of invoices to customers.
- Payment Processing: Processing of incoming payments and allocation to receivables.
- Accounts Receivable Accounting: Integration with financial accounting to update account balances.
- Reporting: Generation of reports on receivables balances, incoming payments, and default rates.