Factoring Companies Guidebook
Concessions
Where a Client operates a sales outlet within a retail store owned and managed by a third party.
Concerns
The sales actually made by the Client may be offset by charges incurred in the utilisation of the retail space. This may include staff costs, display's, advertising and rent. The latter may be fixed according to the retail space or variable dependant on sales volume or indeed a combination of both.
The till receipts which confirm the sales are also handled by the store, not the Client and the actual sales levels are therefore subject to confirmation from the store. It is not uncommon for the invoices on this type of sale to be on a "Self-Billing" basis, raised by the store, which is the Client's debtor.
Identification
Make enquiries of the client as to whether they operate sale outlets as concessions within stores or other retail establishments.
Review the nature of the invoices from the debtor and seek to identify whether there is any offset for rent etc.
Review both the sales and purchase ledger for common names and determine the method of settlement for any costs relating to the concessions.
Treatment
Ensure that the Client fully understands the method of accounting for the concessions by the store and they regularly and accurately verify the value of the debt due to them. The supporting documentation to substantiate this type of invoice may be required prior to funding. If we are not comfortable with the control and management of these debtors and the level of debt erosion due to deductions, the accounts should not be funded. As a general guide, if the level of erosion approaches or exceeds the book debt margin it should not be funded or should form part of a contra valuation, if contra trading is allowed.
Organizations Known to Provide Concession Facilities
Department Stores
Industries where Concessions are known to exist
Clothing
Toys
