Higher Credit Standing
There are several reasons why factoring should improve a client’s standing. With cash flow accelerated by factoring, the client is able to meet his liabilities promptly as and when they arise. The factor’s acceptance of the client’s receivables itself speaks highly of the quality of the receivables. In the case of non recourse factoring the factor’s assumption of credit risk relieves the client to a significant extent from the problem of bad debts. This enables him to minimize his bad debts reserve.
In order to accelerate cash flows it is essential to ensure the flow of critical information for decision making and follow up and eliminate delays and wastage of man hours. This requires sophisticated infrastructure for high level specialisation in credit control and sales ledger administration. Small and medium sized units are likely to face a resource in this area. Factoring designed to place units on the same level of efficiency in the areas of credit control and sales ledger administration is that of the more sophisticated large companies.