Navigating the complexities of cash flow management is a constant challenge for businesses, especially when long payment terms are involved. To tackle this, many companies consider options like skonto and factoring. Although both methods aim to accelerate cash flow, factoring often stands out as the more advantageous choice. Here’s a detailed comparison to help you understand why factoring might be the game-changer your business needs.
Skonto is a discount offered for early invoice payment, typically a small percentage if paid within a shorter period, like 10 days instead of 30.
Pros:
- Faster Cash Receipt: Motivates quicker payments.
- Simple Implementation: Easy to understand and apply.
- Reduced Risk: Early payment reduces unpaid invoices.
Cons:
- Reduced Revenue: Discounts lower your earnings.
- Customer Dependence: Relies on customer cooperation.
Factoring is a financial service where you sell your unpaid invoices to a factoring company. They pay you 80% of the invoice value mostly within 24 hours and the remainder when your customers pay. Factoring is not a loan, so you incur no debt.
- Immediate Cash: Receive funds mostly within 24 hours.
- Improved Cash Flow: Better financial planning and investment.
- Risk Reduction: Factoring companies assume unpaid invoice risks.
- Simplicity: Easy, intuitive process.
- Security: Invoice insurance against non-payment.
- No Debt: Unlike loans, factoring does not increase your debt.
- Immediate Cash Flow: No dependency on customer cooperation.
- Risk Management: Factoring companies handle unpaid invoice risks.
- Full Revenue: You get the full invoice value minus a small fee, avoiding revenue loss.
- Efficiency: Frees up time and resources by managing receivables.
Factoring offers a more reliable, efficient, and risk-free solution for improving cash flow and managing receivables compared to skonto.
Want to know how factoring can help your company? Contact us non-bindingly through our form, and we will get back to you. We’re here to answer your questions and help you find the best solution for your business.
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