Factoring Companies Guidebook
Advanced Billing/Pro-Forma Invoicing
An invoice which is raised legitimately, in advance of the provision of the service or supply of goods, to which it relates. Pro Forma invoices are a form of Advance Billing, generally for goods rather than services and for the purpose of obtaining payment up front.
Examples:-
- Rent
- Storage
- Hire Charges
- Maintenance Charges
See also: - "Deposits", "Pre-Invoicing"
Concerns
Whilst the invoice may comply with the terms and conditions of sale and the customer's requirements, being paid promptly at the date of invoicing, there is no debt. This arises as the service is performed, or once the goods have been delivered. Final delivery, such as in the case of maintenance charges may cover a period, generally of up to 12 months. The assignment of such invoices would potentially expose us to prepaying against a future debt. If the Client ceased to trade before completing the service (or delivering the goods) the debt would not be collectable, or if already paid, the debtor may seek to offset against other outstanding debts.
Identification
A review of the Purchase Orders, Contracts and Invoices should identify this type of invoicing, while the nature of the business may also provide an indicator.
Always make enquiries of the Client or Prospect as to whether they invoice in advance or ever raise pro-forma invoices.
Treatment
This type of invoice should not be assigned to us, or if this is found to occur, should not be funded, being reserved in full. A business would not be suitable to be factored if the majority of its invoicing is raised in advance of the performance of the service or delivery of the goods. Care should be exercised and reported where debts of both this type and factorable debt are mixed to the same debtor.
