List the steps in factoring process?

1.	List the steps in factoring process?
Answer» Factoring is derived from a Latin term “facere” which means ‘to make or do’. Factoring is an arrangement wherein the trade debts of a company are sold to a financial institution at a discount. Factoring Process: 1. The firm enters into a factoring arrangement with a factor, which is generally a financial institution. 2. Whenever goods are sold on credit basis, an invoice is prepared and a copy of the same is sent to the factor. 3. The debt amount due to the firm is transferred to the factor through assignment. 4. On the due date, the amount is collected by the factor from the customer. 5. After retaining the service fees, the remaining amount is sent to the firm by the factor.

Answer»

Factoring is derived from a Latin term “facere” which means ‘to make or do’. Factoring is an arrangement wherein the trade debts of a company are sold to a financial institution at a discount.

Factoring Process:

1. The firm enters into a factoring arrangement with a factor, which is generally a financial institution.

2. Whenever goods are sold on credit basis, an invoice is prepared and a copy of the same is sent to the factor.

3. The debt amount due to the firm is transferred to the factor through assignment.

4. On the due date, the amount is collected by the factor from the customer.

5. After retaining the service fees, the remaining amount is sent to the firm by the factor.

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