Cash flow factoring

Both factoring and invoice discounting can be described as ways to get immediate cash by selling accounts receivable to a third party, usually a finance company. In fact, the two methods are more similar than they are different.

Invoice factoring, also referred to as asset securitization, is an outright sale of receivables to the finance company. The business gets cash and the finance company collects the debt, keeps the interest and gets a discount fee on top of that for its trouble. Invoice discounting can also be termed a sale of receivables, but in this case administration of the receivables and their collection does NOT change hands. The business that earned the income still holds that responsibility.

Here are some questions to consider in order to choose which method is best for your company:

1. Are you concerned with the cost of collections in your company? Are they getting out of hand? Is your collections area fully staffed with competent and reliable personnel? If you think your company would be better off reducing the amount of resources devoted to this function, factoring is the better choice for you, as a lot of it, but not all, can be offloaded. If you already have a well-working collections department you might rather choose invoice discounting. That way your staff and procedures regarding collections remain in place.

2. Knowing that the finance company will undoubtedly treat your customers with the utmost courtesy, respect and professionalism, are you nevertheless concerned that he may prefer to be dealing directly with your company? Perhaps billing requests often come together with customer service requests. Your customer is generally not aware of the sale of his receivable to you with invoice discounting. Not only is he aware of a factoring arrangement, but also he is subject to confirmation calls on individual invoices by the finance company on occasion. If this is something you know would disturb your customers you may need to choose invoice discounting.

3. What are your current informational needs with regard to collections efforts and your customers? Do you currently collect this data and rely on it to make future credit decisions for this customer? Can the finance company provide it in the format and frequency you desire? If not, invoice discounting may be the right choice, so all your current data collection techniques will not be disturbed.

4. What are your cash requirements? With either factoring or invoice discounting, you are paying for the immediate cash. Doing the collections yourself at a normal rate would return you more actual cash. But invoice discounting returns you more cash than does factoring. This is, obviously, because the finance company takes on more responsibility and more duties with factoring than with invoice discounting.

5. How large a portfolio of unsecured receivables does your company hold? How diverse is it? Are there any single customers who hold more than 20% of the total receivables balance? Generally, companies using invoice discounting tend to be larger and have a more diverse portfolio. This could be why they chose invoice discounting, however, rather than a characteristic. They already have the collections efforts and data collections methods in place and the cost and difficulty involved in changing them might be prohibitive for a factoring arrangement. Diversity in the portfolio is something finance companies look for under both arrangements.

Making an honest assessment based on these factors will allow you to make the right choice for your company. You’ll soon be on the way to a healthy cash flow, no matter which you choose.

Unique Tips for Bad Credit Debt Consolidation.

You've probably seen the ads for bad credit debt consolidation. These companies claim they can help you consolidate and eliminate your debt, even if you are overwhelmed by bad credit and haven't made payments recently.After they have worked theirr magic, you'll be left with, "only one uncomplicated monthly payment!"

There are some honest companies who really want to help people who have bad credit. They usually charge reasonable upfront fees, avoid making extravagant claims, and offer professional references on request. Then there is another type of debt consolidation company.  This type of company makes you think an easy solution exists, but in reality, they are simply preying on your fears. However, the last kind of business is the norm.

So what is it that dept consolidation companies do for you?

Bad credit debt consolidation companies talk to your creditors and try to lower your interest rates and monthly payments. The total amount that you owe for the month will be known to you, after they have reached an agreement with your creditors.  The debt consolidation company will make payments to your creditors after you've sent them this money.

Do legitimate debt consolidation/bad credit companies really exist?

Yes, but usually not through companies that send you emails or advertise on late night television. To qualify for an unsecured loan, your credit score should be high. You may, however, be able to refinance your house or your car to pay off unsecured debt. Your bank or mortgage broker can help you.  Reviewing your budget with a recognized financial planner and determining how you can avoid debt in the future might be a good idea.

Bad credit debt consolidation can be achieved by rolling these debts into one, low interest, credit card. There are some disadvantages to this approach. If your credit is truly in the toilet, the credit card company might hike up your interest rate without warning. Also, you need to do something with the rest of your credit cards (e.g., cut them up or burn them) starting new balances on them should be avoided. The final requirement would be to make at least the minimum payment to the card company which holds the balance of your debts.

Seeing as bad credit debt consolidation is a frightening possibility, it is all the more important to find a legitimate company capable of and desiring to relieve your debt woes. 

If you'd like additional information about bad credit debt consolidation, or a debt consolidate loan, debt consolidation leads and related issues, please visit our web site.

 

Which Would You Rather Choose? Debt, Bankruptcy or Budgeting?

Why do you need a basic budget and what is it anyway?  A basic budget allows you to outline your financial goals and hopes. Simply put, it is a money plan for the future - an estimation of monthly income and expenses based on previous bills.

With a budget you can set, and hopefully achieve, your financial objectives by establishing how you will allocate your available funds now and in the future. This allows you to make financial decisions without the stress of unplanned emergencies that inevitably crop up.
Budgeting allows you to put aside a certain amount of money that will be used for expected as well as unexpected costs.

The initial step in setting up a budget is defining your fixed expenses such as mortgage or rent, car payments, insurance (life, home, auto, health), student loans and so on and getting them down on paper. Fixed expenses are the ones that you have every single month and their payment amount never differs. The payments you have to make each month come from your income, no matter what. Without this first step you have no clue where you've been, where you are now, or where you will be in the future.

Next, gather up your old checkbooks and write down all your regular, but not fixed, monthly purchases such as groceries, cable, dry cleaning, auto maintenance, gas, utilities, credit cards, eating out, daycare, etc. etc.  Then you total up the recurring and the fixed and see what is leftover, if anything, when you deduct this spent amount from your monthly income.

You don't need any fancy software or computers to do any of this. Plain old pencil and paper will work fine. Remember that this is just a starter exercise to get a general picture of where you are each month.

It's a very simple first step. If your monthly income totals $3,000 and the pencil and paper exercise above shows your expenses at $3,600 you are in trouble. Simple and plainly. No ifs, ands, or buts about it.

Budgeting is an effective and fundamental tool that is beneficial to everyone. Just doing the basics as listed above may shock you into further action or, if you are like the 90% of the "do nothing but moan about it crowd", you will continue spending your way into debt and bankruptcy.