In the prior post we talked about direct payments to the factoring company. When a client purposefully or otherwise tells the customer to pay them instead of following the instructions to pay the factor, this is called ‘mis-direction’ of funds. This will cause a default of the factoring agreement. Mis-direction is the severest no-no in the factoring world. The factoring agreement will allow the factoring company to immediately call each and every one of your customers and demand that all payments owed to your company be paid directly to the factor. Mis-direction is simply not tolerated and is penalized severely.
Yes, from time to time a customer will mistakenly send a payment to the wrong address. The proper procedure in these cases is to contact the factor, photocopy the check and overnight it to the proper ‘remit to’ address in care of the factoring company. It’s only in egregious situations when the client has been withholding information that they deposited the customer payment long ago that those severe remedies are called into action. Having financed so many invoices over the years, it is pretty easy to spot the bad magician who thinks they can get away with a little mis-direction.