How to Factor Invoice Rates
Companies have several accounts that are receivable at the end of a stipulated time frame. Many times, companies sell their accounts receivable to another company at discounted rates. The company that purchases the invoices is called the factoring company or the factor. The factor pays the company the majority of the amount on the invoices immediately. The remainder is paid only if the factoring company realizes the payments. The factoring company charges a commission for its services. There are few steps involved in factoring the invoices.
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Instructions
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Make a list of all your invoices. Verify the names of your debtors, their addresses, their phone numbers and the balances owed by them. Use an Excel Spread sheet to make the list.
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Make a list of all the factoring companies operating in your vicinity. Contact them and learn about the rates, taxes and fees charged by them. You may get in touch with them either by physically visiting their offices or by telephone or over the Internet. Compare the rates of all the companies, and focus on the best factor.
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Sell your invoices to your selected factoring company. The company usually will pay you upfront between 70 and 85 percent of the value of the invoices, according to the Business Dictionary. The factoring company contacts your debtors for the payments. The debtors are obligated to pay money on the same invoice but at the factoring company's address.
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Wait for more payments from the factoring company. The factoring company pays you if it is able to realize the remainder of the money. At this time, it will also charge you its fees and service taxes.
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