Monday, October 30, 2006

The Commercial Invoice

It's an essential document that evidences the sale of goods or services in a B2B transaction. Yet, it's often taken for granted and not properly scrutinized.

Since Factoring is all about the funding source (the Factor) buying the commercial invoice, herewith is a summary of the important features of an invoice in order for it to qualify for Factoring:

1. Value Of The Invoice - This must be clear and unambiguous. Rarely is there any problem in determining how much the debtor owes to the vendor.

The invoice will usually itemize the quantity of the product of length of time the services were provided. This will be done by a unit price and a total price for the product or service delivery.

2. Payment Terms - The invoice must have the payment terms clearly stated on its face. To be factorable, the invoice must be payable in full and must be in respect of a completed supply of goods or services.

The Factor has to be pretty sure that the debtor will pay within that time frame. Otherwise, factoring fees and discount rates may be affected. The longer the debtor takes to pay, the greater the risk of default - and the greater the risk to the Factor buying that invoice.

3. Verification - The invoice will have the name and contact details of the debtor required to pay it. When it is submitted to the Factor for funding, the Factor will always verify the authenticity of the invoice to confirm that the debtor will no make any set-off, charge-back or adjustments to the invoice amount.

© 2006 Sanjeev Aaron Williams & Cashwerks All Rights Reserved

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