Debtor finance companies can finance an invoice only after it has been verified. This article helps you understand why invoices are verified and how the process works.
Understanding debtor finance
Debtor finance, also known as invoice factoring, is a type of business financing. It helps companies that have cash flow problems because their commercial clients are paying invoices in 30 to 60 days. The programme finances the slow-paying invoices, which gives the business money to pay for expenses and growth. Most debtor financing programmes focus solely on financing invoices. Therefore, the accounts receivable ledger is the main collateral that the finance company is interested in. In many cases, this ledger is the only real collateral that the company has. Because of this invoice-focused structure, debtor finance companies verify that each invoice is accurate before financing it. This process helps ensure the accuracy and stability of the collateral base. To learn more about debtor financing, read “What is Debtor Financing?”
How are invoices verified?
The actual verification process varies by debtor finance company. However, the process itself is simple. Most companies verify invoices by phone or by email. A representative contacts the payables department of the company that is paying the invoice and verifies that:
- The invoice was raised properly
- All paperwork has been received
- The value on the invoice is accurate
- The services/product were satisfactory
One important aspect of the verification call is that it serves as a quality assurance process for the client. Verification enables you to find potential problems early on, when there is usually still time to fix them.
How are problems handled?
Problem resolution also varies by company, but most follow the same process. If a problem is found during the verification process, you are advised about it as soon as possible. This notification allows you to take corrective action and keep the client relationship strong.
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