Factoring Companies Guidebook
Pre-Invoicing/Pre-Assigning
Definition
Any invoice which is raised before delivery of goods or completion of service and then assigned to us for an advance. These will be raised either to obtain early payment from the customer or from us.
See also: - Part Deliveries, Advanced Billing
Concerns
Whatever the reason for Pre-invoicing, where invoices are notified immediately, and the effect is that availability is generated within the facility against uncollectable debts. This is a material breach of the Factoring/Discounting Agreement and could be regarded as fraudulent.
Identification
The Validity of Debt test should reveal the incidents of pre-invoicing; this must be extended to current debt, when identified, to quantify the current exposure. For the purpose of reporting, the Pre-invoicing period should be calculated as the number of days between notification of assignment and delivery. This situation tends to occur where customers endeavor, with the Client's assistance to utilize their current years' budget, so as not to lose it. Where such situations occur e.g. Government bodies, it is incumbent upon the Client to advise the Discounter in advance of notification of assignment.
Treatment
Some Client's systems operate in such a way as to evidence pre-invoicing by a few days on each invoice; this is acceptable where a delay in notification is built in to counter this. Where there are examples of longer delays, then a reserve must be calculated on the basis of the current exposure.
