A list of debtors and what they owe the company – normally it is divided into 30 day splits of how old the debts are. For example, current 0 to 30 days, 30 days to 60 days, 60 to 90 days, 90 days and over. It is normally generated by an accounting package. See account receivable.

Account receivable

money owed by a debtor (outside party) to a business or individual, usually for goods sold or services rendered. ^[1]

Activity fee

The amount deducted from the face value of the invoice (normally a percentage) for the processing and assignment of the invoice from the client to the factor/discounter

Administration fee

Sometimes another name for activity fee or a charge a factor/discounter might put onto an account for various reasons

Administration

Legal state of affairs where a company unable to pay its debts as and when they fall due, has an Administrator appointed to control the company. It has the effect of putting the company’s creditors’ payments on hold until either the company resumes trading under a Deed of Company Arrangement or the company is liquidated.

Administrator

Normally an accounting firm that is an insolvency practitioner who is appointed either by directors of the company or a charge holder to take control and oversee the running of the company for a short period of time (in “administration”) due to the company not being able to pay its debts as and when they fall due (Insolvency). The administrator is a stop gap position and Company either goes into liquidation or continues to trade under a Deed of Company Arrangement. See Liquidation, Deed of Company Arrangement

Advance

The dollar amount of the debt/invoice value the factor/discounter pays to the client in relation the assignment of the debt: any extension of credit. Bankers talk of advances when the rest of us mean loans. An advance from a Banker in this context could be in the form of a drawing under a factoring/discounting facility, overdraft facility, a fully drawn advance or term loan, a line of credit with a bill option, a bill facility or a personal loan. ^[1]

Advertising subsidies

Normally occurs where client’s customer is a major retailer who deducts amounts from the debts owed to the client for the retailer advertising the client’s goods. This is a common term in these types of industries.

Aged balance report:

A schedule of outstanding debts analysed by reference to their due date.^[2]

Ageing

The analysis of outstanding debts by reference of their due dates.^[2]

Agency agreement (partnership agreement)

A factoring facility where the debtor is notified of the assignment and needs to pay the factoring company to extinguish the debt, but the client does the day to day collection aspects on the debt as agent for the Factor.

Agency factoring

Factoring disclosed to the debtors but with the sales accounting and collection functions retained by the client. ^[2]

Agent

In factoring/discounting context, where the client acts as an agent for the factor/discounter normally collecting the debt on the factor/discounter’s behalf and in the discounter’s case also banking the money for them. Alternatively, the import factor may accept all debts from the export factor with recourse but undertake not to exercise any recourse to the extent that he has available rights of set-off.

Ancillary rights

All rights under a contract of sale or service giving rise to a debt (including the right to returned goods) and all guarantees and insurance in relation to a debt. ^[2]

Asset based finance

A generic term describing the financing of a Company’s current assets such as stock, debtors, etc by a financial institution

Assignment notice

The written instruction to the debtor to pay the factor normally placed on the face of each invoice issued by the client other than in invoice discounting or undisclosed factoring. ^[2]

Assignment of debt

Where the ownership of debt by a creditor is transferred to another party eg a factor/discounter.

Associate

A person connected with the client by reason of common control or relationship. ^[2]

Associated entities

Where directors/shareholders or the company hold positions in other companies. Can lead to a higher chance of fraud taking place if the client and debtor are associated entities.

Associated rights

Ancillary rights ^[2]

Audit

a periodic, independent examination or verification of the assets and liabilities and financial transactions of a company to determine the reliability of its accounting records. An audit entails a systematic examination of the activities and status of a business based principally on investigation and analysis of its systems, controls and records. An audit is carried out by an auditor (a type of accountant) who is professionally qualified to judge the accuracy of a company’s accounts and form an independent opinion. The audit aims to ensure the honesty, integrity, consistency, accuracy and reliability of the management of a company on the shareholder’s or lender’s behalf, although it cannot guarantee the competence of the management. ^[1] Normally used by a factor/discounter to check that Invoices are legitimate and payments regarding debts are correctly being allocated as well as the company being solvent.

Availability

The amount payable, at any one time, by the factor to the client for or on account of the purchase price of debts sold to the factor. ^[2]

[1] The Language of Money. Edna Carew
[2] The Law and Practice of Invoice Financing, F.R. Salinger

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