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As a professional, I am going to explain casual factoring and factoring as a continuing agreement. These are two different types of factoring that businesses can use to improve their cash flow and manage their finances.
Firstly, let`s discuss casual factoring. This is a type of factoring where a business sells its outstanding invoices to a factoring company on an ad-hoc basis. The factoring company then pays the business a percentage of the invoice amount upfront, usually around 85-90%. The factoring company takes over the responsibility of collecting payment from the customer and pays the remaining balance, minus their fees, to the business once the payment has been received.
Casual factoring can be useful for businesses that have irregular cash flow and need quick access to cash. It can also help businesses that have customers that take a long time to pay their invoices. By using a factoring company, the business can receive payment faster and reduce the risk of late payments or bad debts.
On the other hand, factoring as a continuing agreement is a longer-term arrangement between a business and a factoring company. This type of factoring involves the business selling all of its invoices to the factoring company, rather than just specific invoices as in casual factoring. The factoring company then takes over the responsibility of collecting payments from the customers and provides ongoing funding to the business.
Factoring as a continuing agreement can be useful for businesses that have ongoing cash flow issues or need a consistent source of funding. It can also be beneficial for businesses that want to outsource their credit control function as the factoring company will be responsible for chasing payments and managing customer accounts.
However, it is important to note that factoring as a continuing agreement can be more expensive than casual factoring due to the ongoing fees charged by the factoring company. It is also important to choose a reputable factoring company and read the contract carefully to ensure that the terms are favorable for the business.
In conclusion, both casual factoring and factoring as a continuing agreement can be useful tools for businesses to manage their cash flow and finances. The choice of which type of factoring to use will depend on the specific needs of the business and the terms offered by the factoring company. By using a reputable factoring company and reading the contract carefully, businesses can make the most of these financing options.
