If we discuss the basic elements of business in one sentence, it is nothing but selling of goods or services by one and receiving the goods and services by another. During any business, it is the money that has to be transferred from one account to another. It is pretty simple and logical in context of business. But, what if there is delay in the transfer of money? What if there is absolutely no money at all? Accounts receivable is your last hope and it will give you better option to let the funding come into your account, and your business will face no financial problems.
It is an effective way to deal with money owed to the business by its customer, precisely by another company. Speaking in terms of balance sheet of the company, you can refer to this method of financing as amount of money that customer has to pay. It is also sometimes called as the Trade Receivables, making the whole concept of money transaction slightly clear.
AR Financing is the debt related amount; it falls under the category of current assets. The debt amount has to be paid either in 30 days or 45 days or 60 days or even 90 days. The exact duration of debt will depend on creditor and the debtor. There are several payment practices that can be followed out here, and moreover, these practices are set forth in accordance with the industry norms.
Also known as factoring, it is basically the transaction, wherein the new or small business will sell its accounts receivable or the invoices to any third party commercial financing company, and this company is known as "factor." The nature as well as terms and conditions of factoring company can differ from one industry to another, as well as the financial services providers.
If you are considering this as the loan, then you are sadly mistaken because there is no loan. The cash flow is unrestricted and this provides the company with more flexibility as compared to traditional type of bank loan. The accounts receivable comes with several advantages and some of these include:
· Easy flow of money for the start-up businesses who are in need of the cash flow
· There is no limit to the amount of financing
· The loan dispensed will be based on the credit history of your customers
· This type of financing will not be visible in your balance sheet
· This type of financing is automatically repaid without the need to schedule loan payments
Keep the above basics of AR financing clear in your mind and you don't need to wait restlessly.
For more information about www.invoicefactoringus.com
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