Factoring Companies Guidebook
Common Debtors
These are debtors that feature on both the assigned and unassigned sections of the ledger. This may be due to separate ledgers being produced for individual divisions, different products being sold to the same customers, different terms being given to the same customers etc.
Concerns
Reasons for non-assigned ledger may be of concern as they could be used to hide disputes, extended terms, sale or return and cash sales.
Combined cheques paying off part balances for both the assigned and unassigned ledgers, leading to our banking of the client's money and vice-versa.
Identification
Enquire of the client as to the number of ledgers they operate and identify and/or confirm this at audit and operational visits.
Agree turnover in the Management Accounts with our year to date report and reconcile any discrepancies, other than that attributed to VAT. This test may also pick up fraudulent sales, as the MA may be accurate and not include fraudulent sales. Agree the VAT return to the year to date report and reconcile differences. This may also reveal fraudulent assignments and additional sources of sales.
Treatment
Where it is established that common debtors exist for legitimate reasons, all 'split' cheques must be banked in our Trust Account. A refund can then be made in respect of non-assigned accounts through an NIDC payment.
