Make money online factoring your accounts receivable
A lot of people has suffered from this complication at least once: you get a contract for some kind of job, you do the job and then they don’t pay you because they pay in 90 or more days. You are doing good business but cash flow is languishing.
One way to solve this kind of problem is by factoring your invoices. Financial specialists website Londonmanhattan.net provides a very good definition of factoring in this paragraph:
Factoring is the sale of accounts receivable invoices to a third party who then assumes the obligation of collecting the invoice […] Most factors initially pay 70% to 90% of the invoice amount followed by an additional payment when they collect the invoice. Ultimately, factors discount the invoice from 2% to 5% or more.
For some people factoring is a not well known operation, but is a big one, that in 2005 moved more than $125.5 billion USD only in the US (in the UK this is a lot bigger). As you may guess, factors only consider medium-to-big invoices, for amounts not less than $3,000 USD or something similar. That’s because they must incur in expenses associated with collecting the paper invoice, its payment and verification of commercial behaviors from both parties involved in the invoice.
But does this matter for you and your online business? Until some time ago it didn’t matter too much, but now, with the advent of online factoring systems, it does matters and a lot.Thanks to online factoring systems, factors are now able to accept small invoices, sometimes as small as a couple of dollars each, therefore now you can factor your invoices (even the small ones) and collect your money much more faster than waiting payment from your client, i.e. in 1 day or less.
Yes, you will lose 2% to 5% in the process -that’s why I won’t recommend you to factor every invoice- but if you are in a severe lack of liquidity then factoring can be your rescuer. Please note that the only requirement to sell your invoices to an online factoring, is that your invoice is represented in an electronic support (a computer file in whatever format your internal revenue service accepts), not that your work was done online. So if you are a freelance programmer that works in a local project, and your client gave you an electronic invoice, then you can factor that invoice without problems.
If you consider that online factors can be useful for you, check out the following links that will give you a lot of information about this financial operation:
- 21st Capital, the first working online factoring company. They have a patented system that looks very good.
- Factors Chain International, involves factoring companies from the five continents (the five that are habited ;)).
- Taking the fear out of factoring, an article from Inc.com that describes factoring in depth
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