Settlements with factoring companies. Factoring as a financial tool for managing accounts receivable. Advantages and disadvantages

IN Lately V financial literature The word “factoring” often appears, and there are plenty of articles on the Internet on the prospects for the development of factoring in Russia in the post-crisis period. We will talk about what factoring is, what advantages it provides when used in calculations, and what nuances you should pay attention to in this article.

Factoring scheme

So, factoring, in the simplest sense, is the sale of receivables, or rather the transfer of agency functions for its management to a third party.

Let us immediately note that factoring is fundamentally different from the assignment of the right of claim under an agreement (assignment). During assignment, the rights of claim are completely transferred to the new party, and the counterparty to the contract changes. During assignment, the assignment (as a rule, sale) of the rights of claim occurs unilaterally, that is, the creditor in the simplest case sells the rights of claim ( Money, material valuables, etc.) to a third party, and the consent of the debtor (debtor) is not required. When factoring, as a rule, a tripartite agreement is signed between the supplier, the buyer and the factoring company.

Most importantly, factoring and assignment are regulated by different legal provisions. Assignment is regulated by Chapter 24 of the Civil Code (“Change of persons in an obligation”). For example, company A owes company B 100,000 rubles for goods delivered with deferred payment. Company B, under an assignment agreement, can “sell” the receivables to another company C and forget about it. The obligation of company A for 100,000 rubles remains, but not to company B, but to company C. The sale price does not matter. Company B no longer cares how much Company C can recover from Company A. They work according to this scheme collection agencies to whom banks “sell” problem loans.

Factoring is regulated by another part of the Civil Code. Everything related to factoring is spelled out in the Civil Code in Chapter 43 “Financing against the assignment of a monetary claim.” The article writes: “Under a financing agreement for the assignment of a monetary claim, one party (financial agent) transfers or undertakes to transfer to the other party (client) funds to offset the client’s (creditor’s) monetary claim to a third party (debtor), arising from the client’s provision of goods, fulfillment them of work or provision of services to a third party, and the client cedes or undertakes to cede this monetary claim to the financial agent.”

It's easier to imagine this graphically. IN general view The factoring scheme looks like this:

1. The supplier (creditor) ships products or provides services to the buyer (debtor).
2. The buyer makes partial payment for goods (services). Usually a minimum of 10%.
3. The factoring company (it is called a factor or agent) pays the supplier the remaining balance for the buyer and notifies the latter that the rights of claim for payment of the remaining portion of the payment are now transferred to it.
4. After a certain time, the buyer pays the factoring company the remaining part of the payment, as well as the remuneration for the actually provided installment plan.

As a rule, the factoring company takes on the work of managing accounts receivable: accounting, monitoring financial condition and solvency of debtors and other actions. You should not think that the factoring company will take care of all your receivables. Only those counterparties with whom you have established long-standing contractual relationships and statistics of shipments and payments sufficient to be relatively confident in the solvency of the debtor are hired. Often, in order to reduce possible risks of non-payment, factoring companies analyze the financial condition of debtors according to their financial statements(O we wrote earlier), but not all buyers will want to provide such data to a third party.

A full range of factoring services involves managing accounts receivable, covering a number of risks (loss of liquidity, credit, inflation, currency), information and analytical services ( special programs allowing you to control cash flow, Current state accounts receivable, customer payment discipline, plan daily financial flows companies and generate analytical reports for making management decisions).

Types of factoring

Depending on the relationship between the supplier, the buyer and the factoring company, the following main types of factoring are distinguished (let’s say right away that these types are not prescribed by law, they are more of a terminological nature): with recourse or without recourse.

Factoring with recourse (eng. recoursefactoring) is a type of factoring in which the supplier is obliged to return funds to the factoring company if the buyer (debtor) does not fully fulfill payment obligations (for delivery and remuneration to the factor) within the time specified in the contract.

On the one hand, factoring with recourse is not very interesting to suppliers: in the event of insolvency of the debtor (buyer), the losses will ultimately have to be borne by the creditor. On the other hand, the factor commission with this type of financing is significantly lower, and the manufacturer does not withdraw own funds from circulation, which is critical for certain production processes.

Non-recourse factoring is a type of factoring in which the factoring company assumes ALL risks of debtor insolvency. Of course, in this case, the cost of factoring services will be higher (the factor will include the risk of non-payment in the price), and the requirements for financed consumers will be stricter.

In Russia, factoring with recourse is most common.

Advantages of factoring

Factoring, in its essence, is a unique form of lending to a specific buyer for a specific delivery, while the lending is unsecured; accordingly, the risks of covering possible losses due to non-payment of debtors are returned “if something happens” back to the supplier.

Why is factoring convenient for each party in the process?

It is certainly convenient for the supplier or manufacturer that he receives money immediately upon receipt of the product or service by the consumer. IN in this case it does not matter who pays: the client or the factor. Thus, there is no washout of working capital, and the risks of cash gaps are minimized. The use of factoring schemes gives the supplier additional competitive advantage: it essentially provides a trade credit (well, or delivery with installment payment).

Likewise, it is convenient for the buyer, who can increase purchase volumes and earn additional marginal income. The combination of these factors results in an increase in both sales and production volumes. But the cornerstone in this scheme is the question: “who will pay for the resources provided by the factoring company?” And here the question is exclusively of agreements between the supplier and consumers: as a rule, than longer term installments - the higher the rate for using money from a factoring company. Usually, in practice, part of the commission is paid by the supplier (and this is regulated at the level of discounts), and part by the buyer (so that there is an incentive not to delay the final payment).

The interest of the factoring company is clear - it receives a commission for the money provided.

The undoubted advantage of factoring over conventional lending is more high speed review of documents and “softer” requirements for both documentation and the financial condition of the enterprise. This is compensated by higher (compared to bank loans) financing rate (one and a half to two times more, depending on the deferred payment period). By the way, factoring service rates are not standardized by law; they are determined by agreement of the parties.

The scheme is complicated by the need to sign a tripartite agreement between the factoring company, the supplier and the consumer (as a rule, the more parties are involved in signing legal documents, the longer it takes).

Which factoring company to choose?

To conclude the article, a few words about factoring companies (factors). Civil Code There is only one entity operating in the factoring scheme - a financial agent, which can be ANY commercial organization. At one time, the Ministry of Economic Development explained that the activities of financial agents under factoring schemes are not subject to licensing. Thus, any organization that has sufficient resources to finance the assignment of the right of claim can engage in factoring.

My experience working with factoring companies has shown that in 100% of cases these companies are somehow connected with banks. This is obvious: the necessary technical, information and methodological basis for checking both suppliers and buyers financial institutions Yes (they don’t care who to evaluate – the future loan borrower or future factoring clients).

Previously, banks were also involved in factoring, but since central bank de facto considers factoring operations to be unsecured lending, he has tightened the requirements for procedures and reserves, as a result of which it has become easier to “carry out” this activity in the form of a separate legal entity. Although some banks still practice these operations.

Let's continue to consider different types banking services and we'll figure it out what is factoring. Today, factoring services in Russia, Ukraine and other countries post-Soviet space have not received such wide distribution as abroad, however, they turn out to have a certain supply and demand for them. After reading this article, you will learn what factoring is, who provides factoring services, what forms (types) of factoring exist, what are the main differences between factoring and credit, etc. I hope this will be interesting and educational.

What is factoring?

Factoring is the transfer of rights to receivables to a third party, one of the forms commodity credit. Factoring services are most often used trading enterprises who constantly need working capital, and they cannot wait long for the debtor to pay them. Speaking in simple words, factoring is the purchase of debt.

The term factoring itself is borrowed from in English(factoring), and is translated as “mediation” (factor – intermediary, sales agent). Factoring services are most often provided by us large banks, but sometimes specialized factoring companies are factors.

The founder of factoring is considered to be the United States, where it appeared at the end of the 19th century. In Russia and the CIS, the first types of factoring began to appear only 100 years later - at the end of the 20th century.

Factoring conditions.

Typically, factoring services are provided when the repayment period for receivables does not exceed six months, and the shorter this period, the lower the amount of commission charged for the service.

The amount of commission for factoring services in developed countries amounts to a fraction of a percent, but in Russia and the CIS it is still very high, it can reach up to 15-25% of the debt amount. However, in some situations, suppliers are willing to pay such a huge commission because it is more profitable for them than waiting for a settlement, say, several months.

Banks and factoring companies provide factoring services, of course, not to everyone. They analyze the buyer’s solvency and turnover; ideally, both the supplier and the buyer should be serviced by the same bank, with which the factoring transaction will be concluded.

Factoring sides.

There are 3 parties involved in any factoring transaction:

Supplier (creditor)– a company that sells a certain product or service with deferred payment, providing trade credit.
Buyer (debtor)– a company that purchases a product or service from a supplier with deferred payment.
Factor– bank or finance company, providing factoring services.

Factoring example.

Let's look at how a factoring transaction is carried out using an example.

Let's say a manufacturer or wholesale supplier sells a certain batch of goods to a buyer with a deferred payment or part of the payment (by partial prepayment). Next, the supplier contacts the factor and enters into a factoring agreement with him (an agreement for the assignment of a monetary claim). The factor immediately pays the supplier the amount that the buyer owes him, and the supplier pays him a certain commission for this. Next, the buyer settles the transaction not with the supplier, but with the factor.

Types of factoring.

Let's consider the most common types or forms of factoring, which differ from each other, first of all, in the degree of risk borne by the parties to the transaction.

Factoring with recourse– a type of factoring, which implies that if the debtor does not pay the factoring company, the creditor will have to make the payment.

Factoring without recourse- a form of factoring in which the factor assumes all risks: if the debtor does not pay him, he will simply lose the amount paid to the creditor.

Open factoring– a type of factoring in which the debtor is notified that his debt has been assigned.

Closed factoring– a type of factoring that does not imply notification of the debtor about the assignment of debt (the bank subsequently automatically redirects settlement of the transaction in its favor).

Real factoring- a form of factoring in which an existing debt obligation is assigned.

Consensual factoring- a form of factoring in which a future debt that has not yet arisen is assigned in advance (for example, the seller wants to “insure himself” in this way).

Domestic factoring– a type of factoring in which the debtor and creditor are located within the same country.

External or international factoring– a type of factoring in which the buyer and supplier are residents of different countries.

Differences between factoring and credit.

Let's look at the main differences between factoring and credit.

Deadlines. Factoring services, as a rule, are provided for very short periods (for example, for several days); lending for such periods is not even considered. Long-term factoring (for a year or more) is generally impossible.
Security. In most cases, loans to businesses are issued against collateral, while factoring services are provided without collateral.
Goals. are usually issued for some investment purposes, while factoring services are always financing current activities. In this regard, factoring is more like an overdraft.
Sum. When lending, the borrower receives the full loan amount, and when factoring, a part of it, minus the commission. It also often happens that the factor pays the creditor the amount of the debt gradually, in parts, and some agreed part only after the debtor pays him.
Documentation. Factoring services require a much smaller package of documents than lending services. For reliable clients, this is only a delivery agreement, an invoice, and a delivery note for the goods.
Parties to the transaction. When a loan is received, the debt is repaid by the same party that took it out. And with factoring - a third party.

Advantages and disadvantages of factoring.

Well, in conclusion, let’s look at the advantages and disadvantages of factoring. The main advantage is the opportunity to immediately receive money for the shipped goods, while selling it in installments (there are always more people willing to buy in installments). Due to this, capital turnover significantly increases, which allows the company to develop faster, increase turnover and earn more profit. Using factoring services, the supplier can clearly plan its financial flows and not depend on financial problems buyer.

Factoring services remove a number of risks for the supplier: currency risk (if it is international factoring), credit risk(the risk that the buyer will not pay if it is factoring without recourse), the risk of loss of liquidity, etc.

However, factoring has one very significant drawback - its price, which, unfortunately, in our conditions remains quite high. Therefore, the supplier has the right to choose: use factoring services and pay such a price for them, or not use them, but slow down their financial flows.

The advantages and disadvantages of factoring must be calculated in each specific case, for each specific transaction, and a decision must be made: to use such a service or not.

I tried to explain in simple words what factoring is, what types it comes in and why it is interesting. You have now replenished your stock financial literacy understanding another banking service.

Go to, educate yourself, learn how to effectively use and increase your personal finances. See you again!

One of the indicators financial stability Russian company is the presence of accounts receivable.

Dear readers! The article talks about typical solutions legal issues, but each case is individual. If you want to know how solve exactly your problem- contact a consultant:

APPLICATIONS AND CALLS ARE ACCEPTED 24/7 and 7 days a week.

It's fast and FOR FREE!

This is the debt of third-party contractors of the company arising as a result of the delivery of goods, performance of work or provision of services with deferred payment. Payment under the agreement can be transferred to the next financial period. From point of view accounting, accounts receivable are economic benefits in the form of current asset companies.

Accounts receivable is reflected in balance sheet organization and represents the debit balance of accounts reflecting interactions with suppliers, customers, personnel, government and other counterparties. In the financial statements, accounts receivable are displayed in line 1230 of the balance sheet.

Necessity

Despite the fact that accounts receivable is an asset of the company, the presence of large amounts of outstanding debt from counterparties is associated with a certain risk, due to the fact that partner companies do not always have the opportunity to repay the debt within the terms established by the contract.

However, the debtor's debt as an asset can bring economic benefits to the organization, even if there are doubts about its speedy repayment. This is possible thanks to such a financial instrument as factoring. The sources of this service are banking organizations and companies that are factors. The essence of factoring is that the factor company finances receivables by providing funds for purchases or lending to counterparties.

Factoring will also be useful for organizations seeking to attract significant volumes of credit funds, which require a large deposit to obtain.

Scheme of organization of the procedure

In order to present the model for carrying out factoring operations, we will clearly display it in the form of successive stages:

The supplier company transfers the goods, work or service to the debtor counterparty.
The debtor company pays for the delivery in part.
The factor company, which is an intermediary in this transaction, makes a full additional payment to the supplier of the outstanding debt for the buyer.
The purchasing company pays the remaining balance of the debt and the amount of the commission under the contract to the factor company for the provided installment period.

Differences between factoring and forfaiting

Often, companies in practice confuse factoring and forfaiting. However, these concepts are different. Factoring arises in cases where the factor company acquires the financial claims that have arisen and subsequently repays them.

Forfaiting is the purchase by a bank of a monetary obligation of its client’s receivables, which is presented in the form of bills, certificates and other financial securities.

According to Russian analysts, factoring is the most popular in domestic practice, while forfeiting is widely used abroad.

Contract activities

The agreement for the provision of factoring services is tripartite. Its participants are the debt seller, the factor company and the debtor.

The company that owns the receivable contacts a factoring company and offers to purchase the counterparty's debt. The factor organization collects information about the debtor and the probable level of its solvency, and calculates the amount of its commission.

If accepted positive decision, a factoring agreement is concluded, which must specify all the basic provisions, such as the amount of transferred obligations, terms, rights and obligations of the participants in the relationship.

Based on the results of the signed agreement, financing is provided against the received debt of the debtor.

Factoring acts not only as a tool for repaying debt, but also as a method of debt management. In this case, the factor company is obliged to carry out analytical activities aimed at studying the solvency of the debtor company and the organization of accounting.

Kinds

There are several types of factoring depending on the relationship between the seller, the factor company and the buyer, such as factoring with recourse and factoring without recourse.

Factoring with recourse is a type of factoring in which the debt seller is obliged to return the funds received from the factor in the event of the debtor's insolvency and lack of financial opportunity repay the debt in full.

Of course, this type of factoring is not very beneficial for companies, due to the fact that, ultimately, it can suffer serious losses, but, nevertheless, such factoring costs much less and allows the creditor company not to withdraw monetary resources from circulation.

As the concept puts it, non-recourse factoring is a type of factoring in which the factoring company completely transfers to itself all the risks caused by changes in the financial stability of the debtor.

For domestic practice The most popular is factoring with recourse.

Accounts receivable factoring functions

The importance of factoring in modern accounts receivable management can hardly be overestimated.

The following main functions of factoring as a powerful financial instrument are distinguished:

Insurance of possible company risks allows you to protect the organization in the event that the debtor is unable to make payments under the contract. Concluding a factoring contract will ensure that the creditor company can maintain turnover at an appropriate level in order to prevent bankruptcy.
Analysis of the financial stability of the debtor represents measures to determine the level of solvency of the debtor.
Financial support is related to the company’s ability to organize work with its clients at the proper level of trust using various commodity lending programs. Without the support of a factoring agreement, these activities could be very risky for lenders. Factoring allows a company to receive a debt immediately, without disrupting the organization’s work schedule due to a lack of free cash resources.
The organization of a control system simplifies the methodology for preparing documents for deliveries and the timeliness of transferring credit money.
Stabilization of the company’s work ensures a reduction in the amount accounts receivable organizations, the opportunity to collaborate with new partners, providing favorable conditions commercial lending.

Calculation example

In order to understand the methodology for carrying out factoring operations, we will give an easy-to-understand example.

The company MasterClass LLC shipped goods in the form of stationery to its buyer Imperia LLC on February 1 for the amount 120,000 rubles. The factor company provides 80 percent from the contract amount. Factoring rate 17 percent per annum, an invoice processing fee will be charged in the amount of 100 rubles for one document. Payment deferment 90 days. The debtor repaid his debt on February 25.

The factor company transferred funds to the loan after checking the documents: 120,000 rubles * 0.8 = 96,000 rubles.

The commission for using factoring funds will be: (120000 * 0.8 * 0.17) / 365 * 24 = 1073.09 rubles.

The final overpayment by the lender will be: 1073.09 + 100 = 1173.09 rubles.

After the debtor company repays its debt to the factor, it transfers the difference to the creditor: 120,000 rubles – 96,000 rubles – 1,073.09 rubles – 100 rubles = 22,826.91 rubles.

Despite the fact that factoring operations, as a form of refinancing, are carried out according to a fairly high stakes, the opportunity to use funds without waiting for payment of receivables now is completely worth it.

Accounting

If a company uses a factoring agreement in its activities, it should reflect these transactions in its accounting records. Commission remuneration to the company factor should be classified as operating expenses in accordance with PBU 10/99. If we talk about tax accounting, the amount of remuneration can be attributed to non-operating expenses organizations.

Factoring transactions will be reflected in accounting with the following entries:

Dt 62 Kr 90 – the occurrence of receivables is reflected;
Dt 90 Kr 68 – VAT on sales
Dt 76 Kr 91/1 – transfer of a monetary claim to the factor company;
Dt 91/2 Kr 62 – the claim transferred to the factor is written off;
Dt 51 Kr 76 – funds were transferred by the factor;
Dt 91/2 Kr 76 – commission accrued to the factor;
Dt 19 Kr 76 – the amount of VAT on the commission;
Dt 68 Kr 19 – VAT accepted for deduction;

If the company has factoring with recourse and the debtor has repaid his debt, the following entries will be made based on the chart of accounts:

Dt 76 Kr 51 – return of funds to the factor;
Dt 76/2 Kr 76 – claims against the debtor due to non-payment of debt.

The essence of factoring, which can be seen in accounting entries, comes down to the fact that this method is not a loan, but represents the purchase and sale of receivables.

Advantages and disadvantages

Factoring, being a modern financial tool for managing the receivables of organizations, in practice has both advantages and disadvantages.

Factoring has the following positive characteristics:

Control over accounts receivable; Tax law directly indicates that companies are required to conduct an inventory of receivables not only before compiling annual reports. Factoring allows you to track your outstanding debt and quickly take action to eliminate it.
The risks of paying off the debt are transferred to the factor company;
The ability to effectively use funds issued by the factor for the development of the company;
Increasing attractiveness in the eyes of partners and creating trusting relationships with counterparties in the form of providing various credit programs;
Financial resources are not withdrawn from circulation in connection with the conclusion of a factoring agreement.

Financing carried out under the assignment of receivables is called factoring. There are three parties involved in the operation: the factoring company (bank), the lender (supplier), and the borrower (buyer).

The lender transfers his factoring company and receives 80-90% of the funds for the goods delivered to the borrower. After the borrower repays his obligations to the bank, the supplier will receive the rest of the money, and the bank will receive a commission.

Accounting for factoring operations at the supplier

The supplier keeps records according to the following scheme:

Reflects the buyer's receivables: Debit 62 Credit.
Accrues VAT on a sales transaction: Debit 90.3 Credit.
After collection necessary documents(waybills, invoices) and signing a factoring agreement, assignment of rights of claims to the factoring company is carried out. This operation is reflected in the debit of account 76 and the credit of account 91.1.
Afterwards, the debt in favor of the bank is written off from the buyer: Debit 91.2 Credit 62.
As soon as funds are received from the factoring company, a debit entry is made in the correspondence for loan 76.
The supplier reflects the commission to the bank under the factoring agreement by posting Debit 91.2 Credit 76.
The commission is subject to VAT, so you need to reflect the tax: Debit 19 Credit 76.
And then put for reimbursement: Debit Credit.

If the accounts receivable turned out to be hopeless and the buyer did not repay the debt to the factoring company, then the transfer will have to be returned to the bank (Debit 76 Credit - return of previously transferred funds in the amount of 80-90% of the debt amount), and the buyer will have to make a demand for payment and collect the money independently (Debit 76 “Settlements on claims Credit 76 “Settlements with the bank”).

The seller shipped goods worth RUB 450,000 to the buyer, who guaranteed payment within the next two months. (VAT 68,644 rubles). The supplier organization entered into an agreement with the bank for a factoring service and transferred the receivables. According to the agreement, the bank pays the seller 90% of the debt amount immediately, and the rest after payment by the buyer. The commission is 0.3% of the total amount.

Postings:

Account Dt	Kt account	Wiring description	Transaction amount	A document base
62		The buyer's debt is reflected	450 000	Packing list
90.3		VAT charged on sales	68 644	Packing list
90.2.1	41.1	Write-off of shipped goods	387 235	Packing list
76	91.1	Accounts receivable transferred to the bank	450 000	Factoring agreement Bill of ladingAccounting certificate
91.2	62	Write-off of buyer's debt	450 000	Accounting information
	76	Received payment for goods in the amount of 90%	405 000	Bank statement
91.2	76	Commission of the bank	13 500	Certificate of completed workInvoice
	76	VAT on commission	2059	Invoice
		VAT is accepted for deduction	2059	Invoice
	76	Received balances owed for goods from the bank minus bank commission	31 500	Bank statement

If an organization receives payment in installments, there is a possibility that its debt will be assigned under a factoring agreement. The factoring company can be a credit institution, bank or legal entity.

Accounting with the buyer

When transferring its receivables to a factoring company, the supplier notifies the debtor in writing. After this, the buyer transfers funds for the received material values factor. In order to “transfer” your debt from the seller to the factoring company, you need to make the following posting:

Debit (seller) Credit (factor).

Reflect payment using a standard entry:

Debit (factor) Credit.

The organization received goods worth RUB 700,000 from the supplier. (VAT 106,780 rub.) with deferred payment for 3 months. A month later, a notification was received that the organization’s debt was transferred to the bank under a factoring agreement and upon expiration of the term, the debt should be transferred to its account.

Postings:

Account Dt	Kt account	Wiring description	Transaction amount	A document base
41	60	Received goods from supplier	593 220	Packing list
	60	Input VAT included	106 780	Packing list
68 VAT		VAT is accepted for deduction	106 780	Invoice
60.1	60.1	Re-registered as a factor	700 000	Notice Accounting information
60.1		Money for the goods was transferred to the factor	700 000	Payment order

Accounting with a factoring company

A factoring company that is legal entity, also records transactions for receiving receivables against the provision of funds (banks have their own accounting system with a separate chart of accounts).

The issuance of funds on account of the assignment of debt is reflected by the entry:

Debit 58 Credit 76 “Factoring”.

Debit 76 Credit.

Income from financial investment carried out by debit 76 of account and credit 91.1. After the debt to the factor is repaid, he writes off the amount financial security(Debit 91.2 Credit 58) and charges VAT on the amount of remuneration (Debit 91.2 Credit 68 VAT).

The factoring organization entered into an agreement with the selling company for the assignment of receivables in the amount of 592,000 rubles. For her services she receives 8% of the amount debt obligation buyer (RUB 47,360).

Account Dt	Kt account	Wiring description	Transaction amount	A document base
58	76.5 "Factoring"	Accounting for financial investments (accounts receivable minus remuneration)	544 640	Accounting information
76.5 "Factoring"		Money transferred to the seller minus remuneration	544 640	Payment order
		Received money from the debtor	592 000	Bank statement
76.7 “Settlements for factoring with the debtor”	91.1	Income from a financial investment	592 000	Accounting information
91.2	68 VAT	VAT is charged on remuneration from the difference between the recorded and received financial investment	7224	Accounting information

Factoring is a specific financial instrument, with the help of which control is carried out. Its essence lies in the sale by the client to a banking institution or some company of the rights to demand debt from counterparties.

Factoring has certain similarities with debt assignment, but there are also serious differences. The purchase of debts is carried out by both credit and commercial firms with the appropriate license, but most often clients still resort to the services of banks.

Dear readers! The article talks about typical ways to resolve legal issues, but each case is individual. If you want to know how solve exactly your problem- contact a consultant:

APPLICATIONS AND CALLS ARE ACCEPTED 24/7 and 7 days a week.

It's fast and FOR FREE!

The main differences between factoring and other instruments used to manage accounts receivable are as follows:

The right to provide factoring services belongs exclusively to credit organizations or commercial firms with special licenses;
carried out only on a contractual basis;
is concluded exclusively if there is monetary obligations, and the latter can be either already existing or planned;
there is no need to obtain the debtor's consent;
considered to be financing receivables. In other words, a bank or other organization, when concluding a transaction, acts as a creditor of the company that has this debt acquired;
Debts can be transferred to other creditors only if stipulated by the terms of the agreement.

Scheme

Accounts receivable factoring usually occurs in accordance with the following scheme:

First, the supplier (creditor) ships goods or provides services to the client (debtor).
This client then makes a partial payment, usually at least 10 percent from total cost goods or services.
Next, the factoring company transfers the remaining amount to the supplier’s account and notifies the buyer that it now has the rights to claim payment.
After some time, the client pays the remaining amount along with the remuneration for the provided installment plan to the factoring company.

Typically, the management of receivables, including accounting, monitoring the level of solvency and financial condition of debtors, as well as other actions, is carried out by a factoring company. However, it should be borne in mind that such a company will not work with all existing receivables.

As a rule, only those counterparties with whom the creditor has long-term and well-established contractual relations are taken into account, and the available statistics of payments and shipments make it possible to judge the relatively stable solvency of the debtor

Accounts receivable factoring agreement

A factoring agreement always implies the presence of three parties: the buyer of the debt (factor), the seller (the one who supplies goods or provides services), and the debtor (the one who buys or orders).

The bank receives a request from a client to conclude a transaction with him regarding the acquisition of his receivables. In the process of considering this application, the factor collects data about the client himself and those who are listed as his debtors, the data obtained is analyzed, possible risks are calculated, and the amount of remuneration is determined.

Subsequently, an agreement is signed with a clear and detailed indication of all the legal and financial nuances of the transaction. In particular, the amount of obligations that are transferred and the timing of their receipt, the inherent rights and obligations of the parties, the amount of commission due, details of the transfer of funds and transfer of documents, the procedure for resolution controversial situations and other significant points. It is this agreement that serves as the basis for financing credit institution or a commercial company of the client, and the receivable serves as collateral.

Factoring can be used not only as a method of financing, but also as a tool for managing accounts receivable. In this case, the financial agent must, in addition to receiving payments from debtors, also analyze their solvency, keep records of them, and collect funds.

The customer is primarily responsible for timely repayment of obligations, provided for by the agreement on the supply of goods, performance of work or provision of services. The role of payment recipient can be a supplier or a financial agent. The factor usually receives remuneration of 15-20 percent from the amount of debt that was transferred to him. Responsibilities for its payment may be assigned to the customer.

Risks

Carrying out factoring operations is inevitably associated with certain risks. Moreover, they are borne by each of the parties to the agreement.

A significant part of the supplier’s risks when signing an agreement to purchase debt is assumed by financial agents. The greatest threat is that the debtor may not return the funds in a timely manner or may not return them at all.

For such cases, banks or other factors may include a clause in the contract, according to which, if the debtors refuse to fulfill their obligations, the receivables are returned back to the client along with the funds that were paid for its financing. This is called regressive factoring.

In addition, financial agents are exposed to currency risks that may arise due to changes in the exchange rate of the currency used in settlements between the supplier and the buyer, as well as risks associated with a decrease or complete loss of liquidity.

In order to minimize risks, banks and commercial companies a detailed check of clients is carried out together with debtors, the size of factoring transactions is limited, and regressive agreements are concluded. In fact, non-recourse contracts are signed extremely rarely and only if the factor is confident that the supplier and buyer are financially sound, as well as if there are previously concluded transactions with them.

Regressive factoring of receivables carries a risk for the supplier of goods due to the fact that the receivable may return to him if the debt is not repaid by the buyer on time.

It is advisable to conclude contracts in such a way that payments made by the customer do not go directly to the financial agent, since there is a possibility that he will not inform the client about them and will use them to achieve some of his own goals

Advantages and disadvantages

One of the disadvantages of accounts receivable factoring is that not all companies have the opportunity to use it.

In particular, it is not available to companies:

having a wide range of goods at low cost;
using barter when paying with customers;
having a significant number of debtors with small amounts debts;
classified as subcontractors;
offering highly specialized products.

Today in our country a small number of companies provide factoring services, and sometimes it is more profitable to get a loan than to use these services.

The undoubted advantages of factoring include the possibility of accelerating trade turnover, as well as not having to resort to obtaining credit funds. It is important to note that it can act not only as a financing tool, but also as a way to manage accounts receivable.

Kinds

There are two main types of factoring that determine the relationship between the supplier, the customer and the factoring company: factoring with and without recourse.

Regressive factoring assumes that the supplier returns the funds received from the factor if the debtor does not repay the existing debt within a predetermined time frame. This type factoring is unattractive for suppliers, since in the event of insolvency of debtors, losses in full will still fall on them.

At the same time, the commission paid to the factoring company in this case is significantly lower. In addition, most factors simply will not agree to sign an agreement without this condition.

Non-recourse factoring implies that all risks associated with the potential insolvency of debtors fall on the shoulders of the factoring company. The amount of commission in this case will be significantly higher, and the requirements imposed on the client and debtor will be incomparably stricter.

Calculation example

Let's say a certain company (client) that operates in the field wholesale trade, on September 11, entered into an agreement to supply a consignment of goods from a trading organization (debtor) in the amount of 360 thousand rubles. In accordance with this agreement, payment for products must be made no later than September 23.

Due to a lack of available funds, on September 16 the company signed a factoring agreement with commercial bank(financial agent), to whom the right of claim against the trading organization is transferred.

On September 17, the bank finances the client in the amount of 252 thousand rubles, which is 70 percent of the total amount of receivables. On September 23, the financial agent presents the debtor with his payment request.

The next day, September 24, trade Organization transfers to the account commercial bank the entire amount of debt in the amount of 360 thousand rubles. The remuneration stipulated under the factoring agreement is withheld from it, previously transferred funds (252 thousand rubles) are deducted, and the rest is transferred to the company.