Tuesday, November 23, 2010

Purchase Order Finance Explained By Bernard Linney

Purchase order financing is a facility availed of by many businesses and is especially helpful if you are a reseller or an agent or an intermediary with limited liquidity that is requisite to finance your transactions to move materials and keep the business running. Purchase order financing is a viable solution for any business. To understand its need we need to first understand the business process.
Let us consider the case of, say a software reseller who has received a purchase order from a customer. A purchase order is a document detailing the type and number or units of the required product or service. All the details should be clearly mentioned here and there should be no room for ambiguity. Any ambiguity could lead to misunderstandings and lawsuits.
Now the reseller contacts his principle. Principle refers to the parent company, that is, the actual makers of the software who instead of hiring, training, managing and paying for a sales team have opted instead to outsource the selling part of the job to somebody already in the business, that it, they have partnered with a reseller, also known as partner. To understand why the reseller needs purchase order financing, let’s understand how a reseller operates. See more from Bernard Linney.

Monday, November 22, 2010

Factoring Services Explained By Bernard Linney

Factoring services for small business are means to gain much-required immediate cash and also to tackle the problem of unpaid pending payments. Small businesses do not have the deep pockets and resources and contacts of big corporations and they have to work under certain constraints. The way small businesses handle certain situations is markedly different from procedures followed by big enterprises. Factoring services are a good example for that.
When faced with a pending payment, big corporations usually outsource the work to a third party agency that handles the tasks related to collection like follow-up phone calls, payback plan negotiation etc. In  case of big enterprises, the cost of hiring an agency to do this for them is justified because the stakes are higher in big business and there is a good chance that the deal will be big enough and the amount of money involved will be high enough to warrant such a service. Agencies will collect the payments in return for a fixed fee or percentage. But small businesses mostly opt for factoring services.
In factoring a company sells its account receivables to a third party, called the factor. There are three parties involved here – the buyer, the seller and the factor. The small business would be the seller who has sold a product or service to the buyer. The buyer has yet to make the full payment or has defaulted or is trying to buy time while the seller is getting increasingly uncomfortable with the pending liability. Sudden non-availability of funds due to non-payment of dues can derail a company’s plans.