When invoice factoring companies purchase your accounts receivable for cash flow it is extremely critical customer payments of the invoices must go directly to the factor. The payments should never be sent to you, to be forwarded to the factoring company.
After setting up accounts receivable financing, a lockbox bank address is put in place to receive customer payments. Because invoice financing is largely based on paper exchanging hands, the invoice factoring company must have control of incoming payments. There is no transparency; the customer will be made aware that their remit to address for the invoice is the factoring company’s lockbox address. Even with ACH payments, they must go directly to the factor’s bank.
Failure to comply with this requirement could result in the default of the factoring agreement and usually an immediate collect out of outstanding unpaid invoices with dismissal of the factoring arrangement. By far the single most unsatisfactory action a borrower can do to a factoring company is mis-direct customer payments.