Talk:Factoring (finance)

Should this article be moved?
Should this be moved to Factor (trade), and this page be made a disambiguation page that either goes to "Factor (trade)" and "Factorization"?
 * I agree that "factoring" should be a disambiguation page, and that this page should be moved. Paul August Paul August July 4, 2005 16:20 (UTC)
 * OK I've moved this article to "Factoring (trade)" (although "Factoring (finance) or Factoring (business) might be better). Also since the vast majority who enter or link to "factoring" will expect the mathematical term, I've also decided to use primary topic disambiguation instead. Consequently I've made "factoring" a redirect to "Factorization". I've also gone through and fixed all the links. Paul August Paul August July 4, 2005 17:21 (UTC)
 * moved to (finance) novacatz 13:16, 27 February 2006 (UTC)
 * Definitely Not!!!! Factoring is a major and independant subject in any and ever College Accounting Text Book.  Separate sections here to explain the Economics of Factoring, further explain it is fine.  But to lump it into something else, or remove some of the explanation painstakinglyu made here is a serious Mistake.  Please do not ruin work already done.  Note the Praise given from an American Business man when he saw this as already structured.  If you are not an Accountant, with much knowledge, please don't play around with Accounting Explanations.  Thanks.

problems
Use of the term Lion's Share is quite unusual in an encyclopedia article.
 * fixed novacatz 13:16, 27 February 2006 (UTC)

Factoring and similar financing
The disambiguation helps a lot.

Good links would be "Payday Loans", "Usuary" and similar since in a sense Factoring is a corporate form of payday loan.

Allan Branch

--

I disagree that factoring has anything to do with usury, and while "payday loans" might seem analagous on the surface, there's alot more to factoring than payday loans.

Larry Wimble

---

Factoring has nothing to do with Usury, (although there is a commission so hence a form of fee for the service). And there is certainly more to factoring than to payday loans. For one thing factoring can be hidden from the creditors or not. But the request was for suitable links to avoid it being a "stub". I think they are good links. The reason I first thought of them is the similar short-term, advance payment of receipts due nature of both forms of finance.

Allan Branch (September 6, 2006) www.southcom.com.au/~robot

Is Factoring of invoices taxable income on the date of purchase or is it taxable once the customers pays their invoices?

Bandicot80 (Jan 12, 2008)

Removal of content added
I removed Financeexpert revision (seen here: ). Because I felt it was biased and cited no sources. Feel free to slap me on the wrist if I did wrong. --Revotfel 00:27, 14 November 2007 (UTC)
 * Unencyclopedic and promotional; concur with your removal of the material. Kuru  talk  01:48, 14 November 2007 (UTC)

A/R financing - Article merger / clarification?
Whilst the article states that American factoring is distinct from accounts receivable financing, it does not provide a reason WHY.

Reading the Accounts receivable financing article on Wikipedia, its description doesn't differ from that of American factoring. I therefore suggest to
 * merge the A/R financing article into the Factoring article and
 * add a subsection that distinguishes the two by any existing differences (of which I feel there can't be a lot, as the remaining www uses the terms synonymously).

195.80.201.106 (talk) 14:50, 19 July 2008 (UTC)


 * The difference is that with factoring you sell the debt to the finance company for cash, whereas with invoice discounting (Accounts receivable financing) you borrow against the value of the sales invoices you have raised - which is effectively using the debtors as security. The distinction isn't that big in practical terms I guess. AnthonyUK (talk) 20:31, 21 July 2008 (UTC)


 * First take care of the neutrality dispute over Accounts receivable financing, then we can talk about a merger. Donnabella (talk) 22:38, 29 October 2008 (UTC)

I would say only 1 thing: GAAP by FASB should be used as the primary reference here. Though, because of the constant changes FASB makes to the compexities contained in GAAP, the primary entries should be relatively basic. The basic principles will not change. Links should be provided to additional pages where the various individual and complex situations are discussed in more detail. Once again, GAAP (Generally Accepted Accounting Principles) should be the primary basis for this entries. However, please note that GAAP issued by FASB is American Accounting. Once might also want to reference the international accounting standards upon which the American GAAP is based. Please note that Factoring Receivables is not the only way Receivables are used (as collateral) in short-term financing. Receivables can be 'Pledged' or 'Assigned' "with Recorse" as collateral for loans. When a receivable is either Pledged or Assigned as collateral, the Receivable remains listed as an asset owned by the borrower on the borrower's balance sheet. A Factoring/Sale of a Receivable removes the Receivable from the "borrower's" Balance Sheet. The borrower must record the discount and interest expenses associated with the sale of the financial asset, as well as the Gain/Loss associated with the sale (much like the sale of any other asset). Please note that I believe that, in these troubled times, it is important to note how GAAP (the American Accounting) determines how this is placed on the Balance Sheet and recorded. In Fact, a Pledged Recievable can (at times) be "Repledged" by the lender (the secured party) for the lender's financing. When this is done, the Lender only records a Liability, and the Pledged (and Repledged) Receivables remain recognized on the original borrower's balance sheet as assets belonging to the original borrower. Though the intricate rules may change, the basic concepts will remain the same. Basically, there can either be a Sale of the receivable, or there can be a Pledge or Assignment of the Receivable. In the Sale, the Receivable becomes the property and the responsibility of the buyer (the lender). In the Pledge and Assignment "with Recourse", the Receivable remains the property and the responsibility of the borrower. In the later case, a Liability must be recorded by the borrower, as well as all of the financing expenses. In the former, the "borrower" (seller) does not record a Liability since the Receivable is "Sold" and the "borrower" (seller) only records the proceeds and expenses associated with the sale. Please note that I may also go back to GAAP for further reference. However, the basic "Sale" and "non-Sale" pledging of collateral must always follow these similar rules. —Preceding unsigned comment added by Mgmwki (talk • contribs) 21:49, 31 October 2008 (UTC)


 * I disagree that GAAP should be the primary reference. As you say yourself, US GAAP is the American treatment, and referring to the US accounting treatment will make this article US-centric and, in my opinion, less useful - particuarly to non-US readers. A far better approach is to have the article explain what factoring is (and, if necessary, explain the difference between factoring and invoice discounting) rather than talking about the accounting treatment. In fact, there is no need to refer to the accounting at all in this article. AnthonyUK (talk) 12:25, 1 November 2008 (UTC)

I have rewritten the accounts receivable financing article. Please help with providing sources. I have also removed the merge template as there is clearly no basis for a merger. AnthonyUK (talk) 14:58, 1 November 2008 (UTC)

I understand the missgivings about using USA GAAP. However, ISA (Intrnational Accounting Standards), as put out by ISAB, could be used as a frame of reference(http://www.iasb.org/Home.htm). Please note that GAAP uses many of the same concepts as the ISA. But ISA is an International Standard that might be used to make the explanation less US-Centric. I do believe that the use of Accounting Principles in the explanation is important because: 1) Accounting Principles are developed in such a way as to best present the economic and financial realities of the entity's financial position and financial transactions, 2) Accounting Principles indicate how the financial world actually views the recognition of financial events. To only indicate that "Factoring" (a Sale of Receivables) is used for short-term financing without mentioning the ability to maintain "ownership" of the Receivables in the Pledging arrangement is somewaht missleading; the average person may think that a "Sale" of Receivables is the only way short term financing can be done when Receivables are used as collateral. If the other related financing arrangments possible with receivables are left out, the discussion is incomplete. I believe that the best way to discuss the factoring is to touch on the economic and financial realities associated with both factoring (as a Sale of Receivables) and Pledging. I think that the basic starting point should be the way Accountants "Explain" these transactions and how they affect the financial position. Afterward, economic and financial implications can be discussed in greater detail. Mgmwki (talk • contribs) 14:57, 4 November 2008 (UTC)
 * I have a copy of the IASB standards so referencing wouldn't be a problem (I am an accountant), but my issue isn't the use of US or international standards particuarly. My problem is the idea of describing something with reference to the accounting treatment rather than simply explaining what it "is." If you feel that the description of factoring is unclear, or could be made less ambiguous by emphasising how the alternatives differ, then that can be addressed in the article without needing to mention accounting standards at all...and actually, the discussion does not need to be complete in this article - we simply need to make it clear what the alternatives are and where they can find the article that discusses the alternatives.
 * If nothing else, I would expect the average user to look at this article to find out what factoring is (and indeed, how it differs from invoice discounting), rather than to find out what the accounting treatment is. Especially considering, as you say, the accounting treatment is simply the representation of the economic substance of the transaction. Why describe the representation (the accounting treatment) when you can describe the economic substance itself? AnthonyUK (talk) 20:15, 4 November 2008 (UTC)

Ok, I do understand your point now that I checked the invoice discounting section. However, something should be mentioned indicating that this, as a sale of financial assets, is (only) one way of financing the time period associated with the delay in obtaining the promised payments (the Receivables). It should also be mentioned that, when this is done "without recourse", the asset sale indicates that the rights and the risks associated with the assets being sold pass onto the "buyer". Hence (as is similar to any Arms-Length Transaction), ownership of the receivables being sold pass onto the buyer. It should be mentioned that the value of the Receivables is discounted since the seller must wait to receive money from these assets, but that there could also be an additional loss associated with the sale of the assets (since it is a sale). Finally, I believe that an additional reference should be placed in this section to invoice discounting. The reference should indicate that "Factoring" (here) is a sale of financial assets to receive readily available cash, but Pledging Receivables as Collateral is not a sale of assets. It is (properly) treated as a collateralized loan, and the borrower maintains ownership of the receivables (the assets used as collateral), including all of the risks and rights associated with these assets (even though collections may in some cases go directly to the lender to pay off the borrower's debt). Something along this line might be better I think. The invoice discounting may be referenced when it is indicated that a Pledging the assets as collateral is different from a sale of financial assets. contribs) 16:33, 5 November 2008 (UTC)

As an American businessman, I found the description of factoring and how it differs from other forms of financing, including how it is treated on the balance sheet clear, concise and very helpful. Good job guys! This is one of the reasons I find Wikipedia so helpful. —Preceding unsigned comment added by 67.235.163.76 (talk) 16:43, 18 March 2009 (UTC)

Add Merchant Cash Advance Section?
Should an addition be made to refer to the specific derivative called business cash advance or merchant cash advance, where companies:


 * 1) Sell credit card receivables at a discount
 * 2) Have the payback deducted from future credit card sales
 * 3) Pay the debt back as a percent of net sales.

Industry leaders claim they are providing 20,000 fundings worth nearly $1B US each year. 

Sitecreations (talk) —Preceding undated comment was added at 00:43, 24 July 2008 (UTC)

Im no expert but here is a little insight...

No because that is not AR finance. In AR Finance unlike factoring they do not buy the receivables as the definition states, the definition is incorrect the "Receivables" are borrowed against, it is more closely related to a line of credit where the outstanding invoices are a benchmark as to how much the business can borrow against. Usually the advance rate is 80%, 20% is held as a reserve by the lender and when the business is payed by its customer(another business not an individual) then the reserve is returned minus fees. The payment is payed directly to lender from the clients customer via a lock box. This is established before payment is made to all customers of the client whose invoices will be converted to an AR finance advance.

whereas in factoring each invoice is separate from the pool of what can be borrowed, the advance is based on a percentage, directly related to the invoice amount. Often the fee is charged on the face value of the invoice not on the money borrowed like ar finance. Factoring must establish payment from the customer each time a receivable is purchased while AR the payment is always set to go to the lock box of the lender. each time the client would like to pull out money they can get an advance, and are only charged on the money borrowed not on the face value of the invoice.

142.28.43.3 (talk) 01:38, 17 October 2008 (UTC) In Australia, the term "factor" applies in the same way as the American definition - that of selling the invoice to a factoring firm. In French, a "bill" or "account" is "la facture" 142.28.43.3 (talk) 01:38, 17 October 2008 (UTC) Please not that "Factoring" does involve a sale of Financial Assets under certain conditions! When the "buyer" (deemed as a "lender" here) does not have "Recourse", cannot force the "Seller" ("Borrower" here) to rebuy the financial assets (Receivables), and otherwise takes on the full risks and rights associated with the ownership of those financial assets, it is a sale of the Receivables. In fact, as a sale, the assets should not be listed as owned by the seller ("Borrower" here)! But should be listed as being owned by the buyer (the "Lender" here). This is a proper treatment of a sale of financial (or other) assets. Gain (profit) or loss is properly recognized on the sale of the financial assets. Please note that many firms will sell financial assets in order to provide the cash (liquidity) they need to finance current operations or fill current obligations (Liabilities). However, As I noted above, Financial Assets can be Pledged as Collateral to obtain a loan as well. In this case, the financing arrangement is properly known as a borrowing. The ownership of the Financial Assets Pledged as collateral for the loan remains with the borrower (the original owner). The Borrower only records a Liability (obligation) to repay the lender. The borrower must of course note the fact that the Financial Assets Pledged as Collateral are in fact Collateral for a loan that is still outstanding. 2 different financing arrangements, both used and both viable. Factoring can in fact be a sale of financial assets. Exactly; well said. This is exactly the case. I concur completely. However, "American Accounting", associated with FASB's "GAAP", requires a "No Recourse" element in any transaction just named as a "sale" in order to make sure the firm is actually "Selling" it's Receivables, and not just calling it a "Sale" for some sort of benefit of using the Financial Recognition of this So-called "Sale" on its Financial Statements (published and reported to the Public who must depend on the reported information to assess the firm's Financial Position) even though the Transaction is actually a "Borrowing" in all of its Economic Essentials. Again, this is the "American Accounting", found in the USA "GAAP" standards issued by FASB in the USA. As an additional Comment, whoever added the comment (not cited) that "Factoring" necessarily involves the sale of All Receivables is absolutely incorrect! In fact, one can factor only portion of the Receivables currently owned; there is no requirement that all of the Receivables must be sold within a single "Factoring" Transaction. What if the Firm that buys the Receivables does not want to buy all of the Receivables (thinking this would be committing too large an amount of its Current Liquidity/Cash into 1 firm's financial assets)? Is the buyer restricted in any way (in a "Free Market") from contracting for the acquisition of only a portion of the firm's Financial Assets?? If a firm sells an IPO (Stock Offering), is the buyer restricted in such a manner that the buy must agree to either buy all of the Stock in the IPO or buy none of it?? My understanding of the Financial Markets is that a buyer of financial assets can buy either none, all, or any portion of the total financial assets held by another. Therefore, I am going to change the line to better fit what I have seen in the Link to the Wiki article given by this writer. Like was requested of me, I request that  any entries be footnoted with cites  so that they can be checked and verified for accuracy. I have been an Senior Accountant in the USA for 20 years; however I have not indicated this (previously) in this article or anywhere else in Wiki, and have always used verifiable cites for References rather than cite my years of study and work experience as a rational/reason for a statement in an article. I, like others, would appreciate an independent cite for written  Technical Statements  that others (including some students in college) may depend on when reading the article. Thanks.

Invoice discounting clarification
To further clarify the difference between factoring and invoice discounting, I have moved the old Accounts receivable financing article to Invoice discounting so that there is greater precision in the naming of articles covering this subject, since "accounts receivable financing" fails to specify the method of financing, although the article itself clearly differentiates itself from factoring. AnthonyUK (talk) 23:06, 28 November 2008 (UTC)

History
I added a link and reference to Walter E. Heller. It may be redundant or insignificant. Mwalla (talk) 20:29, 26 February 2009 (UTC)mwalla

The link to the International Factoring Association should be added
The link is www.factoring.org. The association has over 350 member organizations who are factors and provides great information on factoring for readers who want to learn more. They also have a publication called the Commercial Factor which is on their site at https://www.factoring.org/index.cfm?page=information_news. Linda50Words (talk) 22:14, 16 May 2010 (UTC)
 * The above comment is by someone who has admitted a COI, stating that the IFA is her "client" and that she works in "PR". Please exercise extreme caution and research carefully before spamming for her and her client. Wuh  Wuz  Dat  01:17, 17 May 2010 (UTC)
 * The latest entry of this link included "then hit Save Page", which seems to indicate that she is now canvassing others to spam the link. I'm going to semi-protect for now, then blacklist the link if it appears on other articles.   Kuru   (talk)  01:04, 20 May 2010 (UTC)

Thumbs up
An FYI that we just got a compliment for this article on OTRS. -- Zanimum (talk) 19:18, 15 June 2010 (UTC)

Edit request from Marco terry, 1 July 2010
editsemiprotected

Please remove all this item and references as not accurate.

The Walter Heller listed under Walter E. Heller is not the same as the Walter Heller given in the citations. Case in point, the citations refer to a person that is still alive however the wiki entry of Walter heller refers to a person that passed away. This looks like self promotion.

Lastly, I have been in the industry for a decade and never heard of Walter Heller as a prioneer of the factoring industry.

Walter E. Heller was a pioneer on the use of factoring in the United States

Marco terry (talk) 17:46, 1 July 2010 (UTC)
 * It appears to be the same person to me, the Time article is dated 1960. C T J F 8 3  chat 18:40, 1 July 2010 (UTC)
 * Concur with ctjf83 - there appears to be quite a bit of information on him available. This does not seem like self promotion.  Kuru   (talk)  22:48, 1 July 2010 (UTC)

Differences from bank loans section
This content of this section, aside from the first paragraph, has nothing to do with the section title. Perhaps it should be moved to the reasoning section if it is not wholly without merit? (Beautiful sentences include: "As with any technique, factoring solves some problems but not all.") Ed Gibbon (talk) 11:20, 23 September 2012 (UTC)


 * I have cited every Entry I made. In fact, it is the First Section that has the most problem in that:
 * (1) It has only 1 Cite for all of the Statements, and most statements have no Cite (Unfounded?)
 * (2) The statement 70-80% of the Asset Value as an absolute and general statement is incorrect most of the time since
 * (a) The Discount Rate charged to the Seller depends on the going Interest Rate, which differs from time to time,
 * (b) The Risk of the Assets also depend on the quality of the Debtors and the Debt, thereby will also be different in various situations,
 * (c) Fluctuations in the Value of the Local Currency will also impact International Banking concerns (for example) that may purchase Assets as denominated in a given currency.
 * (d) The additional "Price" (additional Profit Margin) charged by buyers of the Factored Assets will depend on Supply & Demand within the Financial Markets.
 * (e) Accountants have to record each of the stated portions of the Factored Assets separately - Price, Discounting leading to Interest Expense, references to the Expense associated with the portion of the Receivable Assets that are normally found to be "uncollectable" (which varies in accordance to the above statements). — Preceding unsigned comment added by Mgmwki (talk • contribs) 18:44, 19 May 2014 (UTC)
 * I can't understand a comment that indicates that most of the article has nothing to do with "Factoring" since what I have written has been duly cited, is what is taught in Accredited Universities, and is what is practiced by American CPAs! The Rest of the Article's "Additions" don't even have adequate citations!
 * Can someone explain how these uncited "Additions" to the original article (that was originally well cited) could be allowed to stand, and references against cited sections (such as this) is also allowed to stand without challenge?
 * If Wikipedia is to be a valid source (like any other well documented and researched Encyclopedia), such uncited additions and unfounded critics of cited sections (taught in Accounting Programs within Accredited Universities leading to the achievement of a CPA license in America) should not be allowed. The only criticism should be one that is similar to that of my friend the "Chartered Accountant"; i.e., the aspects of the Accounting Principles in ISA that is different from the American Accounting as propagated by FASB (as Practiced by American Certified Public Accountants - CPAs) should be clearly delineated as American Accounting.  In response to that Request, I did exactly that; within fully cited sections!  How can students and the average person depend on the validity of what is written when such off-handed additions and comments are added randomly by anyone who wants to?  I believe in the Wiki model; but Citations need to be demanded.  Even criticisms should be cited!!
 * Can someone please answer me on this? I have been a Senior Accountant in America for 20 years, doing Government Accounting, Reviews of Financial Accounting Statements, Financial Analysis and Cost Accounting. I also have a Masters Degree in Economics, obtaining this by taking PhD courses.  The Economics education is required of an American Accountant, and the more extensive Economics Education has been used by myself in both Financial Analysis and Cost Accounting.  I am happy to contribute to a viable and valid encyclopedia that can be used by students (secondary school and college) and the general public, but would find it futile to do so if the writing is corrupted as I see it has been here.  Please answer me on this.  I am frustrated to the point that I may (without adequate response) cease to both contribute or even use the Wikipedia Reference.  — Preceding unsigned comment added by Mgmwki (talk • contribs) 18:34, 19 May 2014 (UTC)

Unused ref
The following reference was tacked onto the Reference section. In case it might have use in supporting article content, I've moved it here: Joja lozzo  04:14, 24 February 2014 (UTC)
 * Farag, Ibrahim (2013). Factoring and accounts receivable discounting

Please be Courteous: Do Not Remove valid Cited Sections, Only Add valid Cited Sentences
Please have some knowledge of Financial Accounting (this is a Financial Accounting Concept) before making changes to this article. Please do not make an attempt to "correct" a cited section; especially if you are not using an accredited source (such as the ISAB, the AICPA - FASB in the USA, or textbooks from an accredited University), or at least a "For Dummies" or "Teach Yourself..." books from reputable sources. I, other viable contributors, and the readers (looking for accredited and reliable information) will all appreciate if this courtesy is extended. A very good college textbook used in many accredited Accounting Programs (leading to a CPA) is: Donald E. Kieso, Kieso, Jerry J. Weygandt, Terry D. Warfield, Ph.D., "Intermediate Accounting", Wiley (Hardback - 768 pages). Thank you all in advance for your trustworthiness, and good actions. — Preceding unsigned comment added by Mgmwki (talk • contribs) 03:09, 25 May 2014 (UTC)  I would like to point out a section to you in which many uncited "revsions" where made; many of these "revisions" actually contained incorrect "information"! Please refer to the below discussion on "Credit Card sales: 3rd Party Financing, not Factoring" for more details about the erroneous (uncited) entries previously made.

Credit Card sales: 3rd Party Financing, not Factoring
. .  ..

Credit-Card sales are an example of a "Third Party Beneficiary Contract"; it is not an example of "factoring". A Third Party Beneficiary Contract "is one in which third party receives benefits from an agreement made between a promisor and promisee," even though the "Third Party is not a party to the contract". The retail store (for example) has an agreement with a bank (the Credit-Card issuer), in which the bank will render payment directly to the retailer for any sales (the benefit) made to the Credit-Card holder.
 * "Banks and financial services companies have developed credit cards that are widely accepted by many merchants, and eliminate the necessity of those merchants maintaining separate credit departments. Popular examples include MasterCard, Visa, and American Express. These credit card companies earn money off of these cards by charging merchant fees (usually a formula-based percentage of sales) and assess interest and other charges against the users. "

This is similar to the situation in which the "Father says: 'ship the goods to my son and I will pay for them.'" In this later example, the father is "engaging in an an original promise to pay for goods that the creditor delivers to son." Because of the contract the retailer (in my prior example) has with the bank (Credit-Card issuer) in which the bank agrees to render payment directly to the retailer for Credit-Card sales, and "oftentimes same day funding of the transaction is made by the credit card company", "...Some bank card-based transactions are essentially regarded as cash sales since funding is immediate."
 * 01-09-X3_________Cash____________________________________________980
 * ________________Service Charge Exp._________________________________20
 * ____________________________Sales Rev.________________________________________1,000
 * 01-09-X3 Note:____Sold Merchandise on "Bank Card"; same day funding, Net of 2% fee assessed by the bank.

Other card sales may involve delayed collection and are initially recorded as credit sales:
 * 01-09-X3_________Accounts Receivable (Bank Debt)____________________1,000
 * ____________________________Sales Rev.________________________________________1,000
 * 01-09-X3 Note:____Sold Merchandise on "non Bank Card"

"When collection occurs on January 25, notice that the following entry includes a provision for the servpaying ice charge. "
 * 01-25-X3_________Cash____________________________________________980
 * ________________Service Charge Exp._________________________________20
 * ___________________________Accounts Receivable (Bank Debt)_______________________1,000
 * 01-25-X3 Note:____Collected amount due from credit card company; net of 2% fee

The retailer has a contractual claim on the bank (promisor) for the sales the retailer (promisee) made to the Credit-Card holder (third party). The Merchant pays a "fee" to the bank for the contractual privilege of getting assured payment from the bank instead of having to maintain a credit department that collect on customers' Account receivable. There is no financing arrangement between the Credit-Card holder and the retail store selling him/her the goods in question, and therefore the retailer maintains no customer account receivable assets. Instead, the merchants' separate agreement with the bank (Credit-Card issuer) does not involve the Credit-Card holder (account receivable for Credit-Card sales are "claims" against the bank who promises to pay on Credit-Card sales). The bank has a separate "financing arrangement" with the Customer; involving "Interest", "Late Payment Charges", "Line of Credit", etc.   As part of the above January 25 transaction, the bank Recognizes the Account receivable that is associated with the "Claim" the bank has against the Credit-Card holder for the goods purchased through the Credit-Card agreement (and paid for by the bank initially).
 * 01-25-X3_________Accounts Receivable ( Customer )____________________1,000
 * ___________________________Service Charge Rev._________________________________20
 * ___________________________Cash___________________________________________1,000
 * 01-25-X3 Note:____Pay merchant for Credit-Card sale; net of 2% fee.

When the customer pays the bank for the Credit-Card bill after the receiving the statement from the bank, the bank records:
 * 01-30-X3_________Cash____________________________________________1,000
 * ___________________________Accounts Receivable ( Customer )_______________________1,000
 * 01-25-X3 Note:____Customer pays the Credit-Card bill.

 Since the retailer does not even maintain a credit department, nor record any Account receivable on its customers' sales, it has no account receivable asset to sell! Therefore, the Credit-Card sales, done via a "Third Party Contract" with the bank (Credit-Card issuer) is not a Factoring arrangement!   If those reading this do not understand the above accounting journal entries (too "convoluted" for you), then you do not have any business writing any information in Wikipedia about either Accounting or Finance! If you obtained a "C" or "D" in (Principles of) Accounting in college and have not worked in the field, then you do not have any business writing any information in Wikipedia about either Accounting or Finance! Entering bad information to misinform readers who want information concerning a financial subject is worse than giving them no information and thereby forcing them to go elsewhere for valid information. It is also a bit annoying to those of us who take care to cite the writing (as is required), and to ensure it is valid and informative to the reader on the financial subject. Please be considerate.  One final note in regards to Credit-Card sales and the reference factoring arrangements. Looking over the Farag, I. 2013 reference with care reveals the author indicates that Credit Card arrangements seem to be somewhat similar to factoring arrangements solely because the promisee relinquishes any Credit risk associated with the Credit-Card sale to the Third Party, and the promisor takes on all of the Credit risk associated with the financing arrangement the bank (Credit-Card issuer) has with the customer (Third Party Credit-Card holder).MGMontini (talk) 05:20, 30 May 2014 (UTC)

"Treatment under GAAP", but no IFRS?
Just wondering, why doesn't this article have anything that references IFRS? Too US-centric, are we? 112.198.90.102 (talk) 13:29, 7 June 2014 (UTC)
 * Place in a separate section on the IFRS; this would be a welcome addition.  Please note, the USA's economy is

one of the largest in the world, and is in the "G7". The FASB version of the International Accounting Principles, GAAP, is not completely different from International Accounting Principles and therefore will properly reflect the International Principles. Together, these factors (the size of the USA economy and the significant similarities between its GAAP and International Standards) indicate that the USA version, GAAP, should be covered within any discussion of Accounting Principles. MGMontini (talk) 16:15, 25 June 2014 (UTC)
 * Thank you for your addition of an explanation from the U.K.; a truly valuable contribution since (as pointed out above) information from other non-USA resources will always be useful to an international readership and those in the USA who do business internationally. As I've indicated on other occasions, USA GAAP is always important since World Economics and International Trade is dominated by the G7 countries and their markets (of which the USA and China seem to be the leading players no-a-days).  However, though I kept your (U.K.) website that you added in your edit, I also put back the USA website reference that I added previously because that reference actually had a bit more of an in-depth explanation of factoring and invoice discounting, along with the (economic) costs and benefits associated with both.MGMontini (talk) 13:26, 14 July 2014 (UTC)
 * Thank you for your addition of an explanation from the U.K.; a truly valuable contribution since (as pointed out above) information from other non-USA resources will always be useful to an international readership and those in the USA who do business internationally. As I've indicated on other occasions, USA GAAP is always important since World Economics and International Trade is dominated by the G7 countries and their markets (of which the USA and China seem to be the leading players no-a-days).  However, though I kept your (U.K.) website that you added in your edit, I also put back the USA website reference that I added previously because that reference actually had a bit more of an in-depth explanation of factoring and invoice discounting, along with the (economic) costs and benefits associated with both.MGMontini (talk) 13:26, 14 July 2014 (UTC)



The link that I removed that you have replaced is not a US site but a British firm of lead generators. Your decision whether to keep it in or not though Chip Johannssen (talk) 13:37, 14 July 2014 (UTC)
 * Thanks. I thought it might be USA (missed the "£" sign).  I read through it, and it seemed like a good practical explanation in the implementation of this kind of financing to meet "Cash Flow" needs.  It even includes a small section discussing the "cons" of this kind of financing, describing when it is impractical to use this type of financing.  Thanks againMGMontini (talk) 14:18, 14 July 2014 (UTC)
 * Thanks. I thought it might be USA (missed the "£" sign).  I read through it, and it seemed like a good practical explanation in the implementation of this kind of financing to meet "Cash Flow" needs.  It even includes a small section discussing the "cons" of this kind of financing, describing when it is impractical to use this type of financing.  Thanks againMGMontini (talk) 14:18, 14 July 2014 (UTC)

Discounting Vs. Discounts and Allowances - Financial Assets Vs. Retail Goods/Services


 Thank you for your recent grammar edit that corrected the "the the" entry to make it solely a "the" entry within the sentence. I must apologize also for using the 'discount' within the text instead of proper 'discounting' reference.  The term "Discounts and Allowances" is associated with "Retail Sales" of goods and services, while "Discounting" is associated with the sale of financial assets. Therefore, a financial asset (such as a Receivable) that is sold at a discount is different from a "Retail good" that is sold at a discount, and the discount on the financial asset is calculated in a mathematical manner that completely different from the calculation used to determine the discount on a Retail good. Though both "discounts" are "market related", in that "price" of the financial asset must be "competitive" with the price of other financial assets in the same way the price of Retail goods must also be "competitive" within the Retail Market, they are calculated differently and represent a different set of market variables. A "Discount" on a financial asset uses the Discounting process that uses the Interest Rate to determine the discounted price of the financial asset. The "Discount" on a Retail good is associated with the reduction in the retail price of the good that is the result of either a decline in the Demand for the good at the old retail price. The Interest Rate variable is determined by a number of factors, including Federal Reserve (Money supply) policy, overall economic activity and the "Balance of Payments" associated with International trade, and the varying value of various currencies around the world. Within the Retail Markets, the retail price of the good will decline mostly because either the overall "Consumer demand" for the good declines, or there is an increase in the "Supply" of the good from other suppliers (other firms); where may be completely "Independent" of the variables affecting overall interest rates.  Therefore, I am replacing your reference to Discounts and allowances with a reference to discounting since we are talking about the sale of a financial asset.MGMontini (talk) 15:43, 25 June 2014 (UTC)

Merger Proposal
Invoice discounting should be merged into this article, as they are the exact same subject. Both pages in question list these terms as synonyms in their intro. This article (factoring) is a little messy already and the other article (invoice discounting) is pretty spare, so I don't think there will be much to copy over in this instance. Mxheil (talk) 16:53, 4 May 2016 (UTC)

In the UK factoring and invoice discounting are both types of invoice finance with the main difference being that factoring includes a sales ledger administration service and tends to be disclosed whilst invoice discounting is undisclosed and the client continues to maintain their own sales ledger.

In the circumstances it would seem sensible to combine the two pages.

Chip Johannssen (talk) 13:10, 9 May 2016 (UTC)

Traditionally factoring in the US has been disclosed to the client, but the growing trend is towards undisclosed. The term 'invoice factoring' applies to both, and in any case, these seem like two ways of doing the same thing, not different things altogether. Mxheil (talk) 21:37, 13 May 2016 (UTC) Merged

Based on the intro to this talk page, the Invoice discounting page was merged on 6/17/2016, but it seems like the merger could have been handled a little better on the page. In particular, the 'See Also' section refers to Invoice discounting as though it will direct somewhere else. In addition, there are several places in the body of the article that link to Invoice discounting.

Finally, (and this point may be largely distinct from my earlier point about the links) the current article does a poor job overall of evincing the difference between invoice discounting and factoring as concepts. The intro refers to both as "assignment of accounts receivable" in the US (although one is italicized and the other is quotes). In the 'Accounts Receivable Discounting' section, there are some additional distinctions drawn, but no real discussion of the loan idea raised in the intro. Indeed, the section title implies Non-recourse factoring is the same as 'Accounts Receivable Discounting'. The section text tries to contrast non-recourse factoring with a loan (at least as far as I can tell. I think the section could use a rewrite aside from the conceptual difficulties). In contrast to the later section, the intro asserts that invoice discounting in the U.S. is a loan. There is some disagreement there that presumably stems from a failure to reconcile the articles during their merger. GeoffreyZanders (talk) 04:50, 7 July 2023 (UTC)

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