Factoring Companies Guidebook

A charge is made in respect of interest on an overdue debt, the terms of which are usually included in the Clients terms and conditions.

Alternative term:

• Surcharges

Concerns

These charges may be legitimate, but as they are levied on a defaulting debtor and an overdue debt, it is unlikely they will be paid.

Identification

Review invoices and the aged debt analysis for signs of this type of charge.

Examine the Client's terms and conditions and make enquiries as to whether the Client tends to levy these charges, or they are merely used as an instrument to gain prompt payment.

Treatment

Such charges should be reserved or excluded. They are likely to appear in the 'Current' column in the ageing, rather than against the overdue invoices, to which they relate.