This is product sourcing strategy from a financial perspective. Factor financing has more positives than negatives to offer the healthcare space. The business of saving lives should not be deterred because of lack of proper financing. Buyers and sellers should be able to carry out smooth transactions that benefit patients so they can have access to medical diagnostic and therapeutic services.
A factor is an intermediary agent that provides cash or financing to healthcare businesses by purchasing their account receivables. In short, a factor is a funding source; the factor agrees to pay the company the value of an invoice- less a discount for commission and fees. Factoring can help healthcare businesses improve their short-term cash needs by selling their receivables in return for an injection of cash from the factoring company. The practice is also known as factoring, factor financing and accounts receivable financing.
Product sourcing strategic financial management includes:
1. Payables finance
2. Dynamic discounting
3. Payables extension
4. Receivables discounting
5. Factoring
6. Forfaiting
7. Borrowing base finance
8. Purchase-order finance
9. Inventory finance
10. Distributor finance
The five main parts of a factoring transaction include:
1. the "fee" paid to the factor
2. the "interest expense" paid to the factor for the advance of the money
3. the "bad debt expense" associated with portion of the receivables that the seller will remain unpaid and uncollectable
4. the "holdback receivable" amount to cover merchandise returns and any other loss or gain the seller must attribute to the sale of the receivables. Sometimes the factor's charges paid by the seller (the factor's client) covers a discount fee, additional credit risk the factor must assume, and other services provided.
5. the "profit" which is the difference between the price the factor paid for the invoice and the money received from the debtor, less the amount loss due to non-payment.
