On 28 July 2021, TechSpecialist delivered IT equipment to the Thulamela Municipality and issued an invoice of R800 000 for this sale. TechSpecialist could not afford to wait 60 days for the pay, so they approached a factoring house to discount this debtor them. If TechSpecialist does not receive the advance from the factoring house, it stands a chance of not surviving through to the next financial quarter due to serious cash flow constraints. On several occasions, the Thulamela Municipality has defaulted on trade debts due to budgetary constraints. The factoring house agreed to advance them 80% of the invoice amount. 20% of the invoiced amount will fall due to the factoring house. The Thulamela Municipality debt will serve as collateral on the advanced amount

Additional Information: The factoring house will follow up on the debt owed by the government and collect the payment from the Thulamela Municipality on behalf of TechSpecialist. The factoring house will charge an effective interest at a rate of 10% per annum on the amount advanced, and interest will accrue daily, for every day the amount is unpaid. The factoring house will also levy a management fee of 1.5% of the amount advanced. The factoring house charges an EFT amount of R200 for transferring the loan amount. There is also a penalty charge of 1% on the advanced amount if the Thulamela Municipality does not settle the debt within 60 days. TechSpecialist will benefit from not having to employ -day period. They would have paid each clerk R15 000 per month. Savings on the telephone and fax-related collection costs made by TechSpecialist would amount to R6 500 per month. The Thulamela Municipality eventually paid the full invoice on 30 September 2021. Assume a year consists of 360 days and a month consists of 30 days. TechSpecialist (Pty) Ltd has been struggling with its cash flow due to customers defaulting on their debts. Management has decided to strengthen its credit management policies. The first policy that management decided to strengthen is the creditworthiness checks for any new customers as management identified this area as a weakness.

Required Calculate the actual cost /saving for TechSpecialist (Pty) Ltd as a result of the factoring arrangement.