Have you encountered Factoring in your professional 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.

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.

"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."