Five Potential Barriers to a Successful Accounts Receivable Factoring Transaction
Accounts receivable factoring is a simple and quick method for temp nurse staffing agencies, medical transcription services and medical coding companies to access working capital. However, certain requirements must be satisfied to take full advantage of accounts receivable factoring's many benefits.
Sales must be final. The only way a company can factor an invoice is if the sale is final: the company provided a service (i.e. a medical staffing agency sent temporary nurses to work in ABC hospital) or a good (i.e. a medical supply company sold latex gloves to a doctor's office), and the customer unequivocally accepted it.
Goods or services must be invoiced after they are received. Some companies bill their customers before providing goods or services. This type of relationship is unacceptable in an accounts receivable factoring transaction.
There can't be any set-offs or charge-backs. Some company/customer relationships allow for set-offs, in which invoice deductions are made based on the receipt of goods and/or services over the amount due on the invoice. Similar to set-offs, charge-backs give a customer the right to deduct payment if goods are incorrect, faulty or damaged. Both of these practices affect the final invoice amount. While set-offs and charge-backs are common in many industries, they cannot exist when a factoring company is involved because factoring firms purchase the invoice in full.
Liens and lawsuits against a company complicate a factoring transaction. Liens and lawsuits affect a company's welfare. In some cases, it's possible for an accounts receivable factoring firm to work with a lien-holder to resolve difficulty. Lawsuits, on the other hand, could raise a number of issues, and need to be addressed on an individual basis.Prospective factoring clients need to be approved during a due diligence process. Most accounts receivable factoring companies will conduct a thorough review before a factoring relationship can be established with a medical staffing agency, medical transcription service or a medical coding company. While an accounts receivable factor's decision relates to the creditworthiness of a company's customers, it's important for accounts receivable factoring firms to understand and evaluate its client's history, operations and prospects. Full disclosure and open dialogue are the most efficient and effective means to a positive accounts receivable factoring relationship.Click here to see a step-by-step factoring diagram.
Philip Cohen is the founder and president of PRN Funding, LLC, which is an extraordinarily focused niche player in the healthcare staffing invoice financing market place. Through a process known as factoring, PRN Funding provides business owners with the financial resources needed to grow and effectively compete in the industry. With no minimums or fixed terms, PRN Funding provides medical staffing agencies with flexible and immediate access to capital. We give you the freedom to factor what you want, when you want, whom you want, for as long as you want. Prior to founding PRN Funding, Mr. Cohen was an executive officer of The MRC Group, a national provider of Medical Transcription Services. Contact Philip Cohen at toll-free 866.776.5407 or via email at pcohen@prnfunding.com Please visit PRN Funding, LLC on the web at http://www.prnfunding.com/
Source: http://ezinearticles.com/
Added: June 24, 2008
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