Factoring Companies Guidebook
Consultancy
Any services performed of an intellectual not a tangible nature for advice and potentially continuing support.
Concerns
Such invoices are generally invoiced in advance and therefore not fundable. The nature of the service and the measure of performance are not always easily identifiable which may result in delays in payment, potential claims for non performance and credit notes for quality reasons. Again these claims are not easily measurable and may be subject to negotiation between the parties. If invoices subsequently disputed have previously been paid, there is also the potential for claims for offset against other valid debts.
Dependant upon the nature of the consultancy work, we could also find that there are penalty clauses for non-delivery on time or "Liquidated Damages", if the work undertaken results in adverse business difficulties for the customer, through either its implementation or non-implementation within the pre-agreed parameters.
Identification
Review Client's and Customers' Terms & Conditions and invoices for any reference to consultancy, advice or support of an intellectual nature. Determine whether satisfaction notes are raised and signed off by the customer for completed work. Make enquiries of the Client as to whether they provide consultancy services.
Treatment
Any consultancy invoiced in advance is not fundable. The extent of this type of work should be identified and a reserve created if there is potential offset and/or penalty clauses. If the major part of the business's turnover is represented by consultancy work, the business is not likely to be factorable.
Where invoiced in arrears, we may require that a signed satisfaction note be obtained from the customer, confirming completion of the work and satisfactory performance, support the invoice.
Where the service is ongoing, we should satisfy ourselves that each stage invoiced is not dependant upon completion of any subsequent stages or the whole contract and that there is no potential of offset or liquidated damages claims if the total job is not delivered or completed.
