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Accounts Receivable Factoring Terminology

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This straightforward introduction to the terminology used in accounts receivable factoring will help you navigate the factoring process like a pro. Terms cover the factoring process, types of invoice factoring, and the role your business plays in the factoring relationship.

Published in: Economy & Finance, Business
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Accounts Receivable Factoring Terminology

  1. 1. Accounts Receivable Factoring Terminology By Factor Finders
  2. 2. Account Creditor The business that provides products/services to customers. (Also known as YOU)
  3. 3. Account Debtor The purchaser of the Account Creditor’s products/services. The account debtor pays off the invoice during factoring. (Also known as your customers)
  4. 4. Accounts Payable The amount customers need to pay for receiving products/services from the seller.
  5. 5. Accounts Receivable The amount not yet collected for providing services or goods to a customer.
  6. 6. Advance Rate The initial amount of cash your company receives through invoice factoring.
  7. 7. Aging Report A report that shows how long accounts receivable have remained outstanding.
  8. 8. Cash Flow The flow of money in and out of your business.
  9. 9. Due Diligence A review of your company’s & your customer’s financial background. This determines your eligibility for factoring.
  10. 10. Factoring Broker Brokers match the Account Creditor to the right factoring company for their particular business and industry.
  11. 11. Non-Recourse Factoring A more expensive invoice factoring option that alleviates the Account Creditor of any liability for paying the invoice upon the Account Debtor’s failure to pay off their debt.
  12. 12. Recourse Factoring A less expensive factoring option in which the Account Creditor is liable for paying the invoice should the debtor fail to pay the factor company.
  13. 13. Reserve The amount of cash from the invoice retained by the factoring company. The reserve is released once the customer submits payment.
  14. 14. Spot Factoring An invoice factoring option that allows the Account Creditor to factor a single invoice without any long-term commitments.
  15. 15. Working Capital Funds available to cover daily business and operating costs.
  16. 16. Contact Factor Finders Call us at 1-855-FACTOR-1 and visit us online at http://www.factorfinders.com/accounts -receivable-factoring

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