Receivables factoring is another name for factoring accounts receivable: a business sells the invoices its customers have not yet paid to a specialist finance company, the factor, which advances most of their value at once and pays the balance, less its fees, when the customers settle. The main entry explains the process, the costs and the accounting in detail.
The wording varies by market. Receivables factoring and debt factoring are common in banking and in the United Kingdom, invoice factoring in sales material aimed at small businesses, and factoring of accounts receivable in accounting texts. All describe the same transaction, in which the factor usually takes over the sales ledger and collects payment directly from the customers, who are told of the assignment.
Two distinctions matter more than the name. The first is who bears the loss if a customer cannot pay, which separates recourse factoring from non-recourse factoring. The second is whether customers are notified and who collects: in invoice discounting the business keeps control of collections and the arrangement is normally confidential. Factoring is one of several forms of receivables finance.