Knowledge in what is invoice factoring
What is Invoice Factoring?
Invoice FactoringInvoice Factoring is also called factoring. It’s a kind of financial product that helps the businesses sell the unpaid bills or invoices. To a third party company. The benefit is this, that factoring company purchase the invoice on a percentage of their total value, and takes responsibility of collecting the payment of invoice. In short: Invoice factoring is a kind of accounts receivable finance. It actually help the businesses providing them working capital and that businesses no longer face the issue of longer payment.How Invoice Factoring Works?Generally Factoring companies clear payment in two installments, first they cover your need providing you the instant cash flow and rest of the amount they provide once your client clear the dues but that amount would be coming deducting some factoring fees. The basic steps they take are:1. As you submit your invoice to the factoring company they validate your invoice and check if you are eligible for the facility or not. After that they purchase your invoice.2. Once the agreement is done, they provide you the money in advance3. Later on factoring companies starts collecting the amount from your customer.4. Once the amount is collected literally they pay you the money deducting their fees. Why Companies use Invoice Factoring Facility?Invoice can take a long time and off course generally it takes a long time to get paid, in between if company doesn’t use invoice factoring it will not obviously be having working capital in between that time and this problem could be solved through invoice factoring company because through factoring you will be able to get working capital immediately. What are the Advantage of Invoice Factoring?1. It will kick off your problem of payment delay2. It helps you providing the safe way to get your stuck cash out in unpaid invoice3. Factoring companies are smart and experience with professional debt collectors, It will also improve your customer relationship.4. Invoice factoring provide better cashflow Can my business use Invoice Factoring?Invoice finance is very effective for small business and startups as well as large businesses too! Factoring companies check some factors such as:1. If Invoice Amount you have shown is Correct or not?2. Was goods and Services delivered on time?3. They make sure if they are buying a quality invoiceSo if you are good at all three factors mentioned above then it’s good to go, you can use invoice factoring for your business.Generally all these validation is done because factoring companies don’t want to affect customer relationship during payment collection. How Factoring Company Buys Invoice?Factoring company’s pays you in two installment in first installment they cover 80% of your amount while remaining amount is provided after deducting the factoring fee once the client clear the payment.Steps to buy Invoice:1. You will submit invoice2. Factoring company validate the invoice3. Send you advance 80% of the invoice4. Factoring company sends you remaining amount deducting the factoring fee.Which is the best factoring Company?In India, M1xchange is the leading company that works as a factoring company, M1 is an online exchange for “TReDS” set up under the approval RBI to facilitate discounting of invoices and Bills of exchange on a PAN India basis.Our ongoing journey in building as India's leading TReDS platform is featured in the latest edition of that TReDS is a good alternative source of funding for MSMEs. Jacob Raphael, COO M1xchangeRead the featured article of Times of India About M1xchange: https://timesofindia.indiatimes.com/business/india-business/treds-a-good-alternate-source-of-funding-for-msmes-say-experts-at-phdcci-virtual-conference/articleshow/77823456.cmsTo know more about M1xchange visit at: https://www.m1xchange.com/
TReDS Invoice Discounting Guide
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