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| Sunday, 2 June 2002 |
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Business |  |
| News Business Features Editorial
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Maximising profits with the minimum risk through factoring Factoring enables a customer to increase opportunities and maximise profits with the minimum risk, Assistant Manager - Business Development of Lanka Orix Factors Ltd. (LOFAC) Shantha Mallawa said recently. He was addressing a seminar on 'How to manage risks and opportunities', which was organised by the Ceylon National Chamber of Industries together with LOFAC. There are many disadvantages in using traditional methods to manage risks and opportunities. These include loosing customers to competitors, being unable to sell to start-up companies or to sell more to existing customers, lack of higher margins and poor relationships with customers. "As factoring is used as a tool to improve the cashflow of a business, you can give credit, but sales will be done on cash. Therefore, it allows you to raise cash in direct proportion to the turnover of the company while allowing the factoring company to perform the routine and tedious tasks of collection and sales accounting," Mallawa said. "After the initial formalities such as evaluating the debtors' credit worthiness, you can supply goods to your customers within the approved credit limit. Once the goods are supplied, the invoices have to be sent to the factoring company and you will be paid. Once the factor collects the payment from your customer, the balance amount due will be given. This way you can give on credit and sell on cash. "Factoring is more flexible and easy than other short-term financing methods. Small and medium businesses do not have the managerial skills or the collection infrastructure. A factoring company provides professional services, enabling these companies to concentrate on their core business," he said. A factor's services include providing clients the ability to draw 80-90 per cent of invoice value immediately, follow up and collection, sales accounting, managing the ledger and credit control. |
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| Editorial | Security Produced by Lake House |
