Remit To: The Lockbox

There is a process required when entering into an arrangement to have invoices factored which has all payments sent directly to the factoring company. The actual contract is called the Purchase and Sale Agreement. In the contract it allows that the seller (your company) of invoices pledges the obligation of the account debtor (your customer) to pay the factoring company, the purchaser. When the customer is ready to pay their due and owing bill, they may create the actual check made out to the seller’s name, as long as it is physically sent directly to the factor’s lockbox. Because there is a power of attorney clause in the contract, the factoring company’s bank will deposit checks payable to the order of their clients. This sometimes makes it easier on customers who find it difficult to change the name on the outgoing payment. Therefore only the remit to address needs to be changed both on the invoice and in the system at the accounts payables department of the customer. The factoring company will contact the customer to verify the remit to address has been changed properly. While the factoring agreement is in place, the proceeds of an invoice become the property of the factoring company.