Factoring Companies Guidebook
Cash Sales
A sale made on the basis of delivery on or after receipt of payment.
Alternative Term :-
Cash on delivery (COD)
Concerns
Goods that have been paid for in cash do not lead to a debt and therefore cannot be assigned. However, many Clients post invoices to Cash Sales or COD accounts, which are simply sales with restricted terms (7/14 days). This may give rise to a ledger balance outstanding on that account. Such action is usually undertaken due to lack of credit worthiness on the part of the customer.
Identification
Review aged debt analysis to identify potential cash sales by account titles. Review of invoices where terms are shown on the face of the invoice.
Treatment
Cash sales should not be assigned.
Where a credit balance exists on the debtor's ledger the whole amount should be added back to the disapproval figure and reserved.
Although we would not normally accept the assignment of cash sales, some Client's who manage their own sales ledger prefer to bank the cash into our Trust Account and assign the invoices, purely for ease of reconciliation. We may accept this situation, where the incidence of such sales is immaterial to our security.
