Invoice Factoring
Definition
Selling unpaid invoices to a third party at a discount for immediate cash. The factor collects from the customers; the business trades a slice of the invoice value for faster access to funds.
Related Terms in Invoicing & Sales
Invoice Discounting
Borrowing against the value of outstanding invoices while the business keeps control of its own collections, unlike factoring. It releases cash tied up in receivables.
Payment Terms
The conditions on which a seller expects payment, such as net 30, net 60 or due on receipt, sometimes with early-payment discounts. Clear terms set expectations and support collections.
Net 30
A payment term meaning the full invoice amount is due within 30 days of the invoice date. Net 15 and net 60 work the same way with different windows.
2/10 Net 30
A payment term offering a 2% discount if the invoice is paid within 10 days, with the full amount otherwise due in 30 days. It rewards customers for paying early and speeds up cash collection.
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