To reduce the cost of collecting its accounts receivable, a company sells its accounts receivable to a financial organization. The service is called:
A) collection agency advance
B) lock-boxing
C) Factoring
D) Funding

Question

Quizplus · Accepted Answer

Factoring is the process of selling accounts receivable to a financial organization, called a factor, at a discount in exchange for immediate cash. This allows the company to receive cash sooner and reduces the cost and time spent in collecting payments from customers. A collection agency advance is a type of loan to cover unpaid accounts while lock-boxing is a process of collecting and depositing payments directly into a designated bank account. Funding is a general term for providing financial resources.

To Reduce the Cost of Collecting Its Accounts Receivable, a Company