How invoice purchases affect your balance sheet – a guide for finance managers

Invoice factoring is not just a way to improve liquidity – it also affects a company's key ratios and financial strength. For finance managers, it is important to understand how factoring affects the balance sheet and cash flow.

When you sell an invoice, you reduce your accounts receivable and increase your liquidity. This means you free up tied-up capital and improve several key metrics:

• Equity ratio – less tied-up capital in receivables results in a stronger balance sheet
• Cash flow – more available funds for current expenses
• Turnover rate – faster capital movement and better efficiency
  
  In addition, you avoid increasing your debt, which makes invoice purchasing an attractive alternative to loans.

Accounting tips:

• Check how factoring affects your income statement
• Collaborate with accountant for correct accounting of sales invoices
• Choose a factoring partner with clear reporting and transparency

Selling invoices is a strategic decision that strengthens the company's financial position – not just a solution for liquidity.