How to Answer: Have you encountered Factoring in your professional experience?
Advice and answer examples written specifically for an Accounts Receivable Specialist job interview.
15. Have you encountered Factoring in your professional experience?
How to Answer
If you are unaware, Factoring is when one company will purchase another company's accounts receivables. This purchase gives a company immediate cash flow to work with, to pay for business needs such as payroll or new equipment. Factoring will generally occur when one company is in financial trouble due to too many outstanding receivables. This situation is never one that a company would desire. Discuss your exposure to factoring, and how you dealt with the process.
Written by Bobbi Witt on January 7th, 2019
Entry Level
"Unpaid accounts can be a slippery slope and, for some businesses that are cash poor, this can lead to the Factoring. I understand this practice to be that of selling receivables, at a discount, to another company. Somewhat like collections. Companies will only do this if they need quick cash and cannot wait for the duration of the credit terms."
Written by Bobbi Witt on January 7th, 2019
Answer Example
"I understand that some companies with extraordinarily long payment terms may find themselves in trouble with cash flow and too many outstanding receivables. This situation is when factoring would come into play. This circumstance is not one that I have ever encountered as an accounts receivable specialist. It's essential that I am highly diligent with every account, never allowing payments to slip through the cracks."
Written by Bobbi Witt on January 7th, 2019
Experience
"Factoring is a transaction in which a business sells its invoices, or receivables, to a third-party financial company known as a 'factor. The factor then collects payments on those invoices from the business's customers. Factoring is known in some industries as 'accounts receivable financing.' The main reason that companies choose to factor is that they want to receive cash quickly on their receivables, rather than waiting the 30 to 60 days it often takes a customer to pay. Factoring allows companies to quickly build up their cash flow, which makes it easier for them to pay employees, handle customer orders and add more business."
Written by Bobbi Witt