Factoring & invoice discounting
A invoice Factor or Discounter charges a commission
or fee for performing the credit and collection function
for factoring and for purchasing the client's receivables
(only for Invoice Discounting, you run your own ledger
confidentail with Invoice Discounting) with or without
recourse to the client for bad-debt losses for both invoice
discounting and factoring. The invoice Factor or Discounters
commission (fee) for service usually ranges between 0.3%
and 3% of sales (fee). A number of conditions will determine
the costs for service such as:
- The
nature of the business, including styling considerations,
seasonable aspects, stability of products, whether
the customer is a manufacturer or wholesaler
- Annual
sales volume of client. As volume increases, the percentage
charged will usually decline
-
- Average
size of order processed. Large orders are no more time
consuming to process than small orders and produce
more revenue for the factor. Therefore, the factor's
commission rate may decline as the size of the individual
orders rises
- Average
annual sales volume per customer. As this figure rises,
there is less work and follow-up for the factor, since
the client's business is becoming concentrated in few
accounts. The commission rate will tend to decline
-
- Credit
worthiness of the client's customers. If the risk is
relatively small, the factor's commission may be lower
-
- Client's
selling terms. If they are long, the factor must wait
to collect its receivables, this would require a higher
fee
-
- Other
services such as billing, may be provided by the factor
that will increase costs and raise the charge to the
client
-
Additionally, the factor charges interest (fee) on funds
provided. This borrowing is typical this is charged a
rate above the Bank of England base rate.
To find out more and obtain indicative fees use
our Free indicative interactive
quoting system. How long are you clients taking to
pay you? How much is it costing in interest charges.
Use our FREE
interactive debt turn calculator.
express quote
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