An important part of the invoice verification process that factoring companies use prior to making an advance on the accounts receivable is to determine that the customer is not crediting any monies off their payment. When the factor finances an invoice they want to make sure 100% of the total invoice amount will be paid by the customer directly to the factoring company. This may require the customer in certain situations to sign off on the invoice stipulating that they have no intentions of deducting anything from their payment. For example, deducting amounts for work uncompleted or products that have not been delivered.
Because we are working off pieces of paper, verifying the invoice is real with each customer is primary to the overall factoring process. Although every factoring company handles this slightly differently, it should be handled as expeditiously as possible without unnecessary complications to the normal business routine of our client’s customer. There are usually one of three methods of verification, a simple email or fax, a phone call to the accounts payable department of the customer and then in particular situations an estoppel letter signed by the customer declaring the invoice will be paid and there are no credits or set-offs. This usually occurs in situations where the invoice might be considered a pre-bill, where the work has not actually been accepted yet.
For the most part, the verification is routine and can be made easier by the factoring client letting the customer know that their financing partner will be contacting them as part of the funding process.