Accounts Receivable refers to all invoices that have been sent to business customers, but have not yet been paid. Invoice is a bill and accounts receivable is a collection of bills.
Description:
There are two types of transactions, which are retail transactions and commercial transactions.
-Retail Transactions is the customer generally has to pay for the product at the time of sale, then walks away with the purchase and receipt.
-Commercial Transactions is when a business sells to other business. Goods are sold on credit for 30, 60, or even 90 days to pay, which is called buying on terms.
Factoring:
-The process of transacting accounts receivable in the secondary market (cash flow industry) is the purchase of accounts receivable from a business at a discount. Factoring allows business to collect money they are owed immediately by accepting a discounted (reduced) amount of the invoice from a third party such as the funding source company.
-In a factoring transaction, a business sells one or more invoices to a factor. A factor is a funding source (funding company) that specialized in funding accounts receivable.
