?
The arrangement in which short term domestic
receivables on sale of goods or services are sold to an agency (known as factor) is called the factoring.
?
Presently two bank backed factoring companies i.e. SBI Factors and Canara Bank. Factors are engaged in business of factoring in association with SIDBI.
?
Introduced in India during 1991 on the Report of Kalyansundaram Committee.
2
? a)
Factor performs functions such as Purchase of receivables.
b)
c) d)
Maintaining sales a/c to creditors.
Collection of debt on due dates. After collection, to return the reserve money to seller &
e)
Provide consultancy services to the customer in respect of marketing, finance & production.
3
Process of Factoring
1.
The seller of goods sells on credit basis to a reputed buyer and gets the invoices accepted for payment
from the buyer.
2.
These invoices are then assigned to a financial institution called factor, which discounts these
invoices and makes payment to the seller of goods.
3.
On due date, the factor recovers the payment from the buyer of the goods.
4.
In case of non-payment, the loss is borne by the
factor in case of without recourse factoring.
4
Advantages of Factoring
a) b)
All sales practically become cash sales to seller. Money blocked with Sundry debtors becomes available for business.
c)
d)
Seller gets rid of collection of receivables.
Sellers w.c. arrangement becomes efficient & reduces his costs.
5
doc_452693634.ppt
The arrangement in which short term domestic
receivables on sale of goods or services are sold to an agency (known as factor) is called the factoring.
?
Presently two bank backed factoring companies i.e. SBI Factors and Canara Bank. Factors are engaged in business of factoring in association with SIDBI.
?
Introduced in India during 1991 on the Report of Kalyansundaram Committee.
2
? a)
Factor performs functions such as Purchase of receivables.
b)
c) d)
Maintaining sales a/c to creditors.
Collection of debt on due dates. After collection, to return the reserve money to seller &
e)
Provide consultancy services to the customer in respect of marketing, finance & production.
3
Process of Factoring
1.
The seller of goods sells on credit basis to a reputed buyer and gets the invoices accepted for payment
from the buyer.
2.
These invoices are then assigned to a financial institution called factor, which discounts these
invoices and makes payment to the seller of goods.
3.
On due date, the factor recovers the payment from the buyer of the goods.
4.
In case of non-payment, the loss is borne by the
factor in case of without recourse factoring.
4
Advantages of Factoring
a) b)
All sales practically become cash sales to seller. Money blocked with Sundry debtors becomes available for business.
c)
d)
Seller gets rid of collection of receivables.
Sellers w.c. arrangement becomes efficient & reduces his costs.
5
doc_452693634.ppt