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This question is about chief finance officer certifications.
What is a factoring company?
A factoring company is an organization that purchases a business' unpaid invoices in return for a factoring charge. The factoring charge, or fee, is then deducted once the full payment has been collected from the customer.
Factoring companies allow businesses to release funds by purchasing their invoices at a discounted rate. The majority of factoring companies operate under recourse arrangements, meaning that the customer is still responsible for any unrecoverable invoices.
Invoice factoring is when a company sells its invoice to a third-party company. It's a form of invoice finance and can give a business a good opportunity to improve its cash flow area.
The invoice factoring provider provides the credit control service to recover payment of an unpaid invoice. Invoice factoring companies allow companies to release cash from their unpaid invoices more quickly. The alternative is having to wait between 30 to 90 days, and sometimes up to 120 days for customers to pay a company.
Factoring companies provide credit control, enabling organizations to focus on other areas of their business instead of constantly following up on late payments.
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