Sales Invoice
In many companies today, it is common practice to assign open invoices within the framework of factoring. This sales invoice has the advantage for the company that the invoice is settled immediately by the factor. This increases liquidity because there are no long waiting periods for outstanding receivables. The money from open invoices can be invested promptly or used to cover liabilities. A company’s credit rating increases and improves its position vis-à-vis banks and other lenders as well as investors.
Factoring reduces the financial risk of the company
The sales invoice protects entrepreneurs from payment defaults. In Germany, it is common to engage in so-called true factoring, in which the del credere protection is assumed by the factor. The factor assumes the full risk if the customer cannot pay an invoice, while the entrepreneur receives his money from the factor immediately after the invoice is assigned. In addition, most factors take over accounts receivable accounting, monitor invoice receipts, write reminders and take care of debt collection in the event of non-payment. This reduces the organizational burden on companies.
Invoice sales can be customized
In addition to invoice sales, in which either all of a company’s invoices or all invoices to specific customer groups are assigned, it is also possible to assign only specific invoices to a factor through individual factoring. This is a good idea if the invoices are particularly large or if they have a very long payment term, in order to avoid long waiting times. As a rule, individual factoring is more favorable than taking out a loan at short notice.
