Factoring In Accounting -

Factoring is a financial transaction where a business sells its unpaid invoices () to a third party, known as a factor , to receive immediate cash . This provides quick liquidity instead of waiting 30, 60, or 90 days for customers to pay. How the Process Works

: Factoring generally boosts operating cash flow by accelerating the conversion of receivables into cash. Pros and Cons Advantages ✅ Disadvantages ❌ Immediate Cash : Improves liquidity and working capital. factoring in accounting

The accounting for factoring depends on whether it is treated as a or a loan : As a Sale (Derecognition) : Factoring is a financial transaction where a business

: The business sells one or more invoices to a factor. known as a factor