Q&A: Should my practice try accounts receivable factoring?

May 8, 2009

We're trying to find a way to get through the tough times right now, and I have read a little about accounts receivable factoring. What do you think about this?

Q: We're trying to find a way to get through the tough times right now, and I have read a little about accounts receivable factoring. What do you think about this? Is it worth it?

A: "AR factoring" basically equates to selling your accounts receivable at a discount to generate immediate cash. It works best in situations in which a practice just can't wait to get paid in order to pay its own bills. With AR factoring, there is a risk of becoming dependent on the factoring on a repetitive basis, which would reduce profitability. You should talk to your accountant about alternative sources of short-term cash to determine if factoring is the best solution in your situation.