Monetizing accounts receivable refers to the process of selling a company's accounts receivable to a third party, such as a factoring company, in order to raise working capital. This can be a useful tool for businesses that need to quickly access cash but may not be able to obtain traditional forms of financing, such as a loan from a bank.
There are several key dynamics involved in monetizing accounts receivable. First, the company selling its accounts receivable (the "seller") must identify a potential buyer, such as a factoring company, and enter into a monetization agreement with them. This agreement will typically specify the terms of the transaction, including the amount of the accounts receivable that will be sold, the discount rate (i.e., the fee that the buyer will charge for providing the financing), and the length of the agreement.
Once the agreement is in place, the seller can begin to monetize its accounts receivable by submitting invoices to the buyer for financing. The buyer will then advance a portion of the invoice amount to the seller, typically between 70% and 90%, depending on the terms of the agreement and the creditworthiness of the seller's customers. The seller can then use this cash to fund its operations or invest in growth opportunities.
Once the customer pays the invoice, the buyer will typically collect the full amount and retain the discount fee as payment for providing the financing. The seller will then receive the remaining balance, minus any fees or charges specified in the agreement.
Overall, monetizing accounts receivable can provide businesses with a flexible and convenient way to access working capital, while also enabling buyers to earn a return on their investment by providing financing to companies in need of cash.
Qube Account Receivables Finance Added Value
PRI® inside Platform
The fully automated solution for account receivables (or AR) financing by PRI® inside offers:
- Daily (re)purchase of invoices
- Daily portfolio analysis and portfolio review
- Daily notification of purchased receivables
- Daily settlement of credit-notes and uncollectable invoices
- Daily liquidity calculations
- Full ‘track and trace’ solution, all required steps are logged and documented
- Fully automated data-exchange after one-off implementation of data-exchange protocol
- Daily funding and settlement towards participating companies & institutions
- Fully integrated risk, operational and legal framework
Set-up for daily settle-ment routine is defined on automated interface between client’s financial and operational systems and Qube’s PRI® inside. Interface will be implemented and supported by Qube Servicing.
After go-live Qube’s clients will have access to all daily settlement reports with automated instructions for payments if required, resulting in a very limited work-load for clients on an ongoing basis.
PRI® inside has been developed based on the in-depth experience with receivables finance with the objective to have a fully front-to-backend automated receivables finance platform based on historic and actual data which to provide full insight & transparency which will be evidenced by demo on request.