International factoring is a very important tool used by those in the export industry, particularly those who use documents against acceptance terms of open accounts to conduct their trades.
It makes the burden of collection and credit, which is always seen in international sales, a lot easier. The credit function can be outsourced to financial factoring companies, which means that their international credit department suddenly becomes a variable expense, rather than a huge fixed cost that is hard to budget for.
Within finance factoring, a commission is paid to the company. These commissions are based on the volume of sales, which does mean the cost fluctuates depending on the sales that have been made. This is highly beneficial during periods of slow sales.
Additionally, it means that companies no longer have to focus on administration of finances, having to approve or deny credit and collecting the money for their sales. Hence, companies are able to offer open account terms to their international customers in a highly competitive way.
The Benefits
There are a number of benefits to choosing financial factoring, including:
- More sales on the global market due to high competitive sales terms
- Protection against foreign customers’ credit losses
- More cash flow due to quicker collections
- Lower transaction costs
- More liquidity, which means you can boost your working capital
- More borrowing potential
- Greater opportunity to take advantage of supplier discounts
These are but some of the benefits and other benefits also exist for importers. It is very important, however, to make sure that you understand what you are doing and that a professional company deals with the finance factoring for you.
Why not schedule you free consultation today to see how this system could benefit you and your organization, potentially allowing you to expand into further global markets.
