![]() ![]() You will be surprised at how much you can save if you automate and collect your own receivables. Compare the costs of invoice factoring with collecting your own receivables and using them as collateral for a secured loan. The true cost of invoice factoring makes it a very expensive way to accelerate cash flow from accounts receivable.Īutomation has made it much less costly to establish and operate your own accounts receivable and collection department, especially with the availability of cloud-based software subscriptions. This is because the factor fee is based on the invoice face amount, not the amount you are advanced. If you receive a 60% advance on an invoice and are charged a 5% factor fee for the first 30 days the invoice is outstanding, the true cost of invoice factoring is the same as an effective annual interest rate of 100% ((5% x 12 months)/.60). ![]() To calculate the true cost of invoice factoring you need to take into consideration the amount of the advance that you receive on the invoice factored. The true cost of invoice factoring is even higher. So on the face of it, your cost to factor an invoice in this example is the same as an effective annual interest rate of 60% (5% x 12 months). Higher credit quality means lower fees.įactor fees can be over 5% of the invoice face amount for the first 30 days the invoice is outstanding, plus additional fees if the invoice takes more time to be collected.
0 Comments
Leave a Reply. |