The Verification Process In Invoice Factoring

When a factoring company advances funds to a company based upon an invoice that has been generated, that is the only collateral or protection they have. In other words, the factor has wired the funds to the company's bank account based upon the belief that the invoice is correct, above-board, and will be paid in a timely manner. Factoring companies rely upon a verification process to minimize their risk. This process helps establish that the work has completed (or the products received), that the price of the goods or services is what was agreed upon, and that the remit-to address is that of the factor. Normally, the verification is done by phone, fax, or email.

In some cases, a more formal process may be involved. If there is a very large invoice, or if there are a small amount of customers, the factor will likely have the customer to sign a document stating that the invoice is correct and will be paid in full.

Many recipients of factoring get nervous about the verification process and how it might cause their customers to view them in a negative light. Those fears can be allayed by letting the customer know that they are merely pledging their receivables to a third party. Verfication is done in the ordinary course of business.

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Kent Harlan, CPA
Ozarks Capital Funding, LLC
www.ocflink.com
kenth@ocflink.com
417.849.7394