Go AD-Free with CAclubindia Pro and get a FREE CCI Coffee Mug. Subscribe Now!

Invoice factoring

MPR sanjay Kumar (CA student) (216 Points)

27 January 2021

what is mean by invoice factoring with examples

Reply
Follow
Share

1 Replies

ayusmita (Tax consultant) (5885 Points)
Replied 27 January 2021

Invoice factoring is an act of selling the debt on one or more outstanding invoices to another business invoice
the business party that buys your invoice debt is known as factor after that the factor pays you an amount which is equal to the invoices value or say what the invoices worth minus a percentage

for example you have a business of landscaping
you sent a invoices of payable worth rs 50000 in 60 days to your client but at the same time you need money urgently to buy a product for expansion of your landscaping business
so you factor the same invoice to your client
the factoring company gives you 50000 minus a few percentage to cover their rates
as a result you have the cash now to buy the product as well as client pays his invoice too the factor will have their money too