Although accounts receivable factoring can not reduce the financing cost in enterprise financial management, it has other important functions. Accounts receivable factoring helps enterprises optimize capital flow. By converting accounts receivable into cash flow, enterprises can withdraw funds in time, meet the capital needs of daily operation and investment, and enhance the liquidity of enterprises.
Accounts receivable factoring can help enterprises reduce the risk of bad debts. Factoring companies usually evaluate and screen accounts receivable, choose low-risk accounts for financing, and bear the risk of bad debts, thus reducing the financial risk of enterprises. Accounts receivable factoring can improve the operating efficiency of enterprises. By converting accounts receivable into cash flow, enterprises can pay back in time, shorten the payment cycle, improve the speed of capital turnover and reduce the occupation cost, thus improving the operating efficiency of enterprises.
Accounts receivable factoring is a common way for enterprises to obtain capital circulation by transferring their unexpired accounts receivable to factoring companies. Under normal circumstances, the enterprise sells the unexpired accounts receivable to the factoring company, which is responsible for collecting the money and paying it to the enterprise according to a certain proportion, so as to obtain cash flow in advance. Accounts receivable factoring can help enterprises to obtain funds quickly, but it can't reduce the financing cost of enterprises.
Financial management function of accounts receivable factoring
Accounts receivable factoring can be divided into recourse and non-recourse. Recourse factoring means that when the debtor is unable to pay, the factor has the right to recover the money from the enterprise and bear the bad debt risk of the enterprise. Non-recourse factoring means that the factor does not bear the risk of bad debts and repayment. Interest is the fee charged by the factor to provide financing for the enterprise, handling fee refers to the fee charged by the factor to handle and manage accounts receivable, and management fee refers to the fee charged by the factor to provide additional services for the enterprise.
With the development of financial market and the increase of financing support for small and medium-sized enterprises, it is expected that accounts receivable factoring will be more widely used. At the same time, with the progress of technology, the technology represented by blockchain will provide a safer and more efficient solution for accounts receivable factoring and further promote its development.