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How factoring works
You send out your invoices including an assignment notice and credit notes as normal providing a copy by post or electronically (on line) to the factoring company.
The factoring company sends out monthly statements and ensures payment is received on time, having agreed a credit control strategy with you beforehand. This allows you to chase up some of your larger/more important customers yourself ensuring goodwill is maintained with them whilst still collecting the money in a timely manner.
Your customers send their payments to the factor who in turn then credit you with the balance due i.e. less the initial payment and their charges.
The sales ledger is updated on a monthly basis by the factoring company and, using the latest internet technology you can have immediate and real time access to all your account details from online factoring companies.
Regular management reports are provided by the factoring company giving details of the sales ledger and your account with them.
Example of typical assignment notice.
Important Notice
The amount payable under this invoice has been purchased by Nationwide Invoice Factoring Ltd to whom you are hereby authorised and requested to make payment at:
PO Box 007 Central England
(Credit Transfers to ABC Bank PLC
1 High Street, London 10-10-01 A/C No 12345678)
At law, they alone can give a valid discharge and should be advised immediately of any dispute likely to defer payment beyond terms of sale.
Initially a supply of stickers is provided if necessary but the notice is usually pre-printed on the invoice.