6. What effects does Factoring have on a company's operating costs ?

Helping a company with trade credit management means outsourcing a task requiring a high degree of specialisation, and relieves the company of the structural costs involved, which are borne by the Factor (Factoring company or bank) in a more economical way thanks to economies of scale implemented, for instance, in the collection of information on transferred debtors and specialised credit management skills.

Factoring also permits transformation of fixed costs linked with direct credit management into variable costs (the Factoring commission).

Of course the possibility of replacing conventional credit management costs with the cost if Factoring, outsourcing credit administration and control tasks to the Factor, depends on the extent to which Factoring is used, in time as well as space, and long-term, extensive use of Factoring works out to be more economical for a company.


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