How does factoring help enterprises "beautify" financial statements?

Financing through factoring is more conducive to the formation of good financial statements for small and medium-sized enterprises than financing through loans. Because both accounts receivable and bank loans are shown as liabilities in financial statements, factoring financing not only does not increase liabilities, but shows that accounts receivable decrease and cash flow increases.

Beautifying factoring business in financial statements;

1. Accelerating the withdrawal of funds is mainly reflected in the reduction of accounts receivable and the shortening of payback period, which can make some financial ratios that reflect the business ability of enterprises more beautiful, which is the most direct beautification;

2. Factoring is actually a short-term financing. If the company's overall return on capital operation is high, this part of the funds released in advance can make the company profitable (on a comprehensive level), which is indirect beautification;

3. Factoring between affiliated enterprises (especially when one of them is a listed company) can change the current accounts between them, which is beneficial to the disclosure of listed companies and the maintenance of their image.