What is accounts receivable factoring?

Accounts receivable factoring is a financial transaction where businesses sell their outstanding invoices to a third party (called a factor) in exchange for immediate cash. The factor advances a portion of the invoice value upfront and collects payment directly from your customers when invoices come due. While factoring provides quick capital, it’s important to compare its costs and impacts against modern AR automation solutions that may deliver similar benefits more efficiently.

What are the primary costs associated with accounts receivable factoring?

The main cost of factoring is the discount fee, which is a percentage of the invoice value retained by the factor for their service. Additional costs may include application fees, monthly minimums, and service charges that compound over time, potentially making it more expensive than implementing AR automation. These compounding costs are why many finance leaders are shifting toward technology-driven solutions rather than financial transactions to solve cash flow challenges.

How does accounts receivable automation compare to factoring?

Accounts receivable automation addresses the root causes of delayed payments by streamlining your entire invoicing and collections process, creating notable improvements to your cash cycle. Unlike factoring, AR automation eliminates ongoing transaction fees, maintains your control over customer relationships, and provides strategic insights to continuously optimize performance. Most businesses find that AR automation delivers greater long-term value while creating a sustainable competitive advantage that factoring simply cannot match.

Payments Archives

A New Way to Turn Payment Behavior into Actionable Signals

See How

Products
Industries
Resources
Partners
Support
- Support Center

Products
Industries
Resources
Partners
Support
- Support Center

Get Started

Deutsch

English

Nederlands

Products
Industries
Resources
Partners
Support
- Support Center

Get started

Solution: Payments

Type

Blog Case Study Ebooks Reports Solution Guide Video Webinars Whitepapers

The silhouette of a man with a thought bubble

Blog

Accounts receivable factoring: When to use it and how to maximize benefits

Struggling with cash flow? Learn when AR factoring works—and how AR automation delivers a smarter, more sustainable alternative.

Video

Cintas Saves $1M Transforming Payment Operations with Billtrust

See how Cintas saved $1M+ and gained 14 full-time equivalents with Billtrust's AR automation. Watch their success story now!

Blog

Best accounts receivable software: Features, benefits and selection criteria

Blog

The New ROI Playbook: Unpacking Research on the Impact of AR Automation

Blog

Accounts Receivable Automation Boosts Efficiency and Collections in Healthcare and Life Sciences, Study Finds

Blog

How accounts receivable process automation drives business efficiency

A title card for The New ROI Playbook Webinar with 3 co-worker at a table

Webinar

The New ROI Playbook: Unpacking Research on the Impact of AR Automation

What’s really driving ROI in AR? A study from Vanson Bourne, commissioned by Billtrust, surveyed hundreds of finance professionals to answer that question and the results may surprise you.