Invoice Factoring
Selling unpaid invoices to factor at discount to get immediate cash.
Formula
Cash Received = Invoice Value − Factor's Discount Fee
Real World
Construction firm Carillion regularly used invoice factoring to bridge the gap between completing large government contracts and receiving payment — when cash flow collapsed in 2018, this dependency accelerated its insolvency.
Exam Focus
Always state the opportunity cost of the discount fee versus the benefit of immediate liquidity when 'assess' is used.
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