Description

The amount unpaid due from a buyer or buyers. (Also sometimes known as the Sales Ledger or Receivables Ledger)

See “Prepayment”

See “Pro-forma Invoice”

A form of factoring where the debt is openly assigned to the factor but the seller retains the obligation to collect the monies owing and maintain the receivables ledger. (Also sometimes known as Bulk Factoring)

Where the Seller acts as an Agent for a third party and does not have title to the goods being sold.

See “Notice of Assignment”

An “Associated Company” is defined as a commercial relationship, either current or historic, which influences, or was influenced by, the prime movers of the seller.

A form of international factoring where an Import Factor signs a contract with a buyer in his country in order to obtain greater security over the receivables and enable him to approve the credit risk on behalf of and Export Factor in the country of the seller.

A clause within a buyer’s Purchase Contract, which specifically bans the assignment of the benefits or proceeds of the sales/purchase to a third party.

Where a Seller holds goods for which the buyer has already been invoiced, i.e. they have not been delivered.  This may be at the request of the buyer, or simply a device by the Seller to obtain early payment from them (or from the provider of trade finance).

See “Agency Factoring”

The party who contracts to buy goods or services from the seller and, on due date, is liable to pay the resulting A/R.

This certificate, usually arising in export and import trade and certifies that the goods conform to the requirements of the importing country.

This certificate confirms and certifies the country of origin of the goods.

Any amount, contractually agreed between the factor and the seller, which is underpaid by the buyer and may be charged back to the seller. (Also sometimes known as a “Debit-back)

See “Seller”

The charge paid by the seller to the factor as that part of the “Purchase Price” which relates to the service aspects of the arrangement such as ledger management, debt collection, credit cover etc.  (Also sometimes known as Administration Charge or Service Fee)

Goods provided to the buyer for which payment is only expected once they have been sold by the buyer, i.e. no outright sale has taken place.  This generally requires regular some reporting by the buyer to the seller for stock held.

Where the buyer of a seller is also a supplier to the same seller i.e. the same entity will appear on both the receivables and purchase ledgers. This can lead to a right of set-off between the parties.

Sales which, are made according to a formal written contract.  Both parties to the contract, i.e. the seller and the buyer, may sign this. In some legal jurisdictions it is not necessary for a contract to be in writing for it to be valid.

See “Credit Risk Cover”

The reverse of an invoice – a document issued by the seller to the buyer showing the amount owed by the seller in relation to returned goods, adjustment of errors etc.

Used in without recourse factoring/receivables financing and refers to the amount up to which the factor will accept the risk in the event that an individual buyer is financially unable to pay.

See “Buyer”

See “Charge-back”

The amount (or percentage) by which any debt has, or needs, to be written down in order for the book debt value to represent the true amount collectable. (see also “Credit Notes”)

See “Buyer”

The moment when possession of the goods passes from the seller to the buyer or when the services are rendered to the buyer.

Any monies taken from the buyer by the seller in advance of the goods being supplied.  This amount may be for part, or all, of the goods and should be deducted from any future invoice amount.

See “Single Factor Exports”.

When payment is made by the buyer to the factor in respect of an assigned receivable.

The charge paid by the seller to the factor as that part of the “Purchase Price” which relates to the prepayments taken in advance of the buyer paying the amount owing.

A defence, counterclaim or set-off raised by the buyer against assigned receivables. Following this the buyer may withhold payment of outstanding
A/R. This is usually related to the quality of the goods.  

The terms under which the documents attached to a Bill of Exchange (BOE) will be released to the buyer by the holder of the documents (usually a bank). Only when the conditions are met, may the buyer obtain release of the goods.

The terms under which the documents attached to a Bill of Exchange (BOE) will be released to the buyer by the holder of the documents (usually a bank). Only when the conditions are met and the full value of the BOE is paid, may the buyer obtain release of the goods.

A form of factoring where both the seller and the buyer is domiciled in the country of the factor.

The date on which payment is due to be made by the buyer.

The factor with whom the exporter has entered into a arrangement to purchase export A/R.

A form of factoring where the seller is domiciled in the country of the factor and the buyer is domiciled in another country.

Sales on terms allowing a buyer a longer than normal period in which to pay for the goods or service.

The contract between the factor and the seller which contains all the terms and conditions which regulate their relationship.

Any invoice knowingly raised by the seller where the goods detailed on the invoice have not been manufactured or delivered.  This constitutes fraud and there is no legal debt in existence.

Any invoice dated later than the delivery of the goods. This procedure is often used to give a buyer longer credit without having to amend the standard terms. It does not change the buyer’s obligation to pay for the goods.

Any material, which is supplied by the buyer to the seller free of charge for incorporation into the goods detailed in the purchase order.  It will not feature in the purchase ledger, nor be identified as a potential contra. More importantly it may remain the property of the ultimate buyer.

See “Non-recourse Factoring”.

The General Rules for International Factoring governing the relationship between the EF and IF as promulgated by both Factors Chain International and International Factors Group

The factor with whom the export factor has entered into an arrangement to provide a combination of credit risk cover, collection and A/R administration services in relation to buyers in the country of the IF.

This is an option for the IF, at his discretion, to provide prepayments to the EF up to an agreed percentage of assigned A/R. This facility is most commonly requested when there is exchange control in the EF’s country which mandates that payment for foreign receivables must made from an offshore account.

A form of factoring where the buyer is domiciled in the country of the factor and the seller is domiciled in another country.

When payment is made by the buyer to the seller rather than the factor in respect of an assigned receivable.

The oldest association of international factoring companies and headquartered in Brussels, Belgium.

A document issued to the buyer by the seller giving full details of the goods or services provided, the total amount owed and the dated by which the invoice must be paid. In a factoring situation the invoice will also feature an assignment clause.

An arrangement whereby the A/R are sold to the factor/discounter on the basis that the seller does not need to notify the buyers of the factors interest in the receivables and he also collects and manages the A/R on behalf of the factor and does not need to submit copy invoices on a regular basis. The arrangement then becomes purely the provision of finance. It is normally carried out on a whole turnover basis and with the factor having the ability to take a formal assignment of the A/R under certain conditions such as a material breach of the agreement. (also known as receivables financing or undisclosed factoring)

The address to which the goods, which are the subject of the A/R, are either invoiced or delivered. There may be two different addresses involved.

A letter of credit is a contractual agreement between a bank, known as the issuing bank, on behalf of one of its customers, authorising another bank, known as the advising or confirming bank, to make payment to the beneficiary. L/C’s are used more frequently in intercontinental trade and can be requested by the seller from a buyer whose credit status indicates a requirement for increased support.

Where the terms of contract with a buyer contains conditions giving rise to monetary claims of a maximum sum in the event of non-performance by the Seller.

A form of factoring where the factor provides the seller with all the services associated with full factoring with the exception of the prepayment facility. Payment for the A/R is then made either:
At an agreed maturity date which is based on the average period of credit taken by the debtors
When payment is received from each debtor or in earlier insolvency in the case of an approved A/R.

A form of factoring without notice of assignment to the buyer. Typically, the seller undertakes the A/R administration and collection as agent for the factor.

A factoring arrangement where the factor provides the seller with A/R administration, collection, credit protection and prepayment facilities.

A written instruction to the buyer (usually on the invoice) that the A/R have been assigned and is payable to the factor.

The terms and conditions under which the seller expects the buyer to pay the invoice. They will normally be stated on each invoice and include the due date, any discount arrangements, payment instructions and an assignment clause where appropriate.

A payment made by the factor to the seller in relation to approved A/R which remains undisputed and unpaid after a fixed period agreed between the parties (usually 90 days).

See “Indirect Payments”

Any invoice which is raised before delivery of goods. These will be raised either to obtain early payment from the buyer or from the trade finance provider and may be an early sign of fraud. (see also “Fictitious Invoicing”)

A payment made by the factor to the seller in advance of the buyer paying the A/R.

The provision by the factor of finance relating to the period between the buyer ordering the goods and the delivery of the goods. This is usually a service that accompanies a post shipment factoring arrangement and the pre-shipment loan is automatically converted into a prepayment when the goods are invoiced.

Any situations where goods are replaced after delivery of the originals, or the goods ordered are substituted for others. This may result in additional invoicing or credit notes.

An invoice, which is raised legitimately in advance of the supply of the goods to which it relates.  Pro-forma invoices are a form of advance billing, for the purpose of obtaining payment up front.

The amount which is arrived at after deducting the all factors charges from the amount payable by the buyer. These charges would normally comprise the commission and the discounting charge where appropriate.

Any invoice where the original invoice date is subsequently amended. This will usually produce an amendment to the due date.

The factor has the right, under certain conditions, to reassign a previously assigned receivable back to the seller. This option which will be covered in the factoring agreement will then give the factor the option of reclaiming any prepayments already made against that receivable.

See “Invoice Discounting”.

See “Accounts Receivable”

A form of factoring whereby the factor provides to the seller; finance, A/R administration and collection but not protection against bad debts.

A sale made where the seller guarantees to take back any unsold goods from the buyer. This guarantee may be in writing, on the buyers order, in any other contract simply an industry practice.  This is often referred to in abbreviated form as “SOR” and represents a potential diminution of the value of the A/R.

See “Accounts Receivable”

When the buyer raises its own invoice for goods received and does not acknowledge the invoice raised by the Client. 

The party with whom the factor contracts to provide a range of factoring services in relation to goods or services sold by the seller.

Where the seller’s terms and conditions of sale allow a settlement discount to be deducted by the buyer. This is usually conditional upon payments being received by the seller within stipulated period prior to the standard due date.

The sending of goods ordered whether by public carrier or the seller’s own transport.

Shipping terms establish the point at which risk passes from the seller to the buyer. They are as important as payment terms and they represent conditions of contract.

An application of international factoring where the export factor assumes responsibility for the approval and collection of a debt in another country without seeking the assistance of an import factor in the buyer’s country.

This is where the buyer has the right, after a period of time and subject to certain conditions, to return old or out-of-date inventory to be replaced by new or alternative stock. This differs from sale or return as the goods are returned for exchange

A form of international factoring where the export factor retains the services of an import factor to administer and provide credit cover in relation to the overseas A/R purchased from the seller.

See “Invoice Discounting”

A contractual obligation to warrant/guarantee the performance of goods over a contracted period of time to a definitive standard or performance.