Enter the receivable amount in the selected currency.
Enter the factoring rate as a percentage.
Enter the financing term in days.
Enter the company fee in the selected currency.
History:

Explanation

What are Factored Receivables?

Factored receivables refer to the process where a business sells its accounts receivable (invoices) to a third party (a factor) at a discount. This allows the business to receive immediate cash flow instead of waiting for the payment terms of the invoices to be fulfilled. The factor then collects the payments from the customers.

How to Calculate Factored Receivables?

To calculate the total cost and net receivable amount when factoring receivables, you can use the following formulas:

  1. Total Cost Calculation:

    The total cost incurred when factoring receivables can be calculated using the formula:

    §§ \text{Total Cost} = \left( \text{Receivable Amount} \times \text{Factoring Rate} \times \frac{\text{Financing Term}}{365} \right) + \text{Company Fee} §§

    where:

    • § \text{Total Cost} § — the total cost of factoring
    • § \text{Receivable Amount} § — the total amount of receivables being factored
    • § \text{Factoring Rate} § — the percentage charged by the factor
    • § \text{Financing Term} § — the duration (in days) for which the receivables are financed
    • § \text{Company Fee} § — any additional fees charged by the factoring company

  2. Net Receivable Calculation:

    The net receivable amount after factoring can be calculated as follows:

    §§ \text{Net Receivable} = \text{Receivable Amount} - \text{Total Cost} §§

    where:

    • § \text{Net Receivable} § — the amount the business receives after factoring

Example Calculation

Let’s say a business has the following details:

  • Receivable Amount (§ \text{Receivable Amount} §): $10,000
  • Factoring Rate (§ \text{Factoring Rate} §): 5%
  • Financing Term (§ \text{Financing Term} §): 30 days
  • Company Fee (§ \text{Company Fee} §): $200

Step 1: Calculate Total Cost

Using the total cost formula:

§§ \text{Total Cost} = \left( 10000 \times 0.05 \times \frac{30}{365} \right) + 200 = 204.11 + 200 = 404.11 §§

Step 2: Calculate Net Receivable

Using the net receivable formula:

§§ \text{Net Receivable} = 10000 - 404.11 = 9595.89 §§

Thus, the business will receive $9,595.89 after factoring the receivables.

When to Use the Factored Receivables Calculation Calculator?

  1. Cash Flow Management: Businesses can use this calculator to understand the costs associated with factoring receivables and how it impacts their cash flow.

    • Example: A company considering factoring its invoices to improve liquidity.

  2. Financial Planning: Evaluate the financial implications of factoring receivables as part of broader financial strategies.

    • Example: Assessing whether to factor receivables as a short-term financing solution.

  3. Cost-Benefit Analysis: Determine if the benefits of immediate cash flow outweigh the costs associated with factoring.

    • Example: Comparing the costs of factoring against potential lost sales due to cash flow issues.

  4. Budgeting: Incorporate factoring costs into overall business budgets and forecasts.

    • Example: Planning for future cash needs and expenses.

Practical Examples

  • Small Business: A small business may use this calculator to evaluate the cost of factoring its invoices to manage seasonal cash flow fluctuations.
  • Freelancers: Freelancers can assess the costs of factoring their invoices to receive quicker payments for their services.
  • Startups: Startups may rely on factoring to maintain cash flow while waiting for customer payments, and this calculator helps them understand the associated costs.

Use the calculator above to input different values and see how the total cost and net receivable change dynamically. The results will help you make informed decisions based on your financial situation.