The factor is subject to different meanings. In the context of business transactions, a postman is a person who sells goods for a commission. A postman takes someone else`s property and usually sells it in their own name. A factor differs from a broker in that a broker does not usually take possession of the goods. A postman can be a financier who lends money in exchange for an assignment of receivables (A/R) or other collateral. Various institutions, including banking subsidiaries and financial companies, offer factoring services. These companies can be found through various methods. The Commercial Finance Association offers a list of its members and their online services to www.cfa.com. Many factoring companies also advertise on the local Yellow Pages under headings such as “Factors,” “Business Financing,” “Accounts Receivable Financing,” or “Billing Service.” Most of the time, factoring is used when a manufacturing company has a big A/R in the books that would represent the company`s total profit for the year. This particular A/R cannot be paid before the end of the year by a customer who has no money. This means that the manufacturing company will not have a profit for the year unless it can find a way to collect the A/R.
The factoring process varies from agreement to agreement, but the basics are similar in most situations. A company that works with a factoring company sends a copy of each invoice issued to the factoring company after billing its customers. Upon receipt of invoices, the factoring company immediately provides its customer with 80 to 85% of the value of the invoices received. A postman is a type of agent who sells property belonging to another called a principal. The factor deals more often with the sale of goods than with the purchase of goods. A factor differs from a simple agent in that a factor must be owned by the client, whereas an agent is not required to do so. The factor-principal relationship is created by a contract. Both parties are expected to comply with the terms of the agreement.
The contract may be terminated by the postman, by the customer or by operation of law. Once the unpaid invoices have been paid by the Company`s customers to the factoring company, the latter will pay the Company the remaining 20% of the value of such invoices less the pre-agreed fees. Factoring fees include fees and interest on the 80-85% paid before collection. An origin factor is the name given to a factor that resides in the same state or country as the customer; A foreign postman is a person who lives in a state or country other than the client`s. While the cost of working with a factoring company is high, it can still be more cost-effective than offering customers a 6% discount on prepayment to encourage prepayment of bills. A postman will provide money to a business almost immediately after a product is shipped, while discounts for advance payments usually only bring in a little earlier than would be the case without the discount. Working with a single factor is much more likely to provide significant cash flow benefits than simply speeding up the collection period. The growth of factoring suggests that many companies perceive it as a cost-effective way to manage cash flow. Factoring companies typically include a range of accounts receivable services as part of their overall service. These services include things like accounting, debt collection, and credit checking. By reducing the internal costs of managing these tasks, it is more likely that a company will be able to justify the cost of labor with a factoring company.
Choosing one factor is similar to choosing another service provider. The goal is to find the best price for the services provided. Several considerations that should be weighed against a factor by the small business owner when establishing fee agreements are: Small business owners should be aware that factoring differs from bank financing in several fundamental ways. On the one hand, it is much more expensive. Factoring fees can cost between 2% and 10% of sales. The terms of the fee vary widely, depending on the credit quality of the borrower`s accounts receivable balances and the extent of services acquired by the factor. In addition, small business owners should realize that using a factor company is an all-or-nothing proposition. Factors typically require 100% of a customer`s receivables. They will not limit their efforts to claims that are considered marginal or high-risk. Factor companies are an increasingly common choice for small business owners looking for capital. According to the World Bank, in its report Financing Small-and Medium-Size Enterprises with Factoring, the volume of factor-settled business in the United States increased by 15.2 per cent between 1998 and 2003. While factoring comes with some risks for small businesses, it is considered a viable short-term cash management tool.
The goods entrusted to the postman are called shipments, and a postman is often synonymous with the recipient. .