Factoring Companies Guidebook
Product Quality and Issues
Definition
This refers to any signs that the product or service is not of the quality or standard, ordered and expected.
Concerns
Our security is only as good as the Client's transactions. If the quality problems are inherent in the product e.g. a basic design flaw, rather than a scratch on a particular item and the problem is not resolved, we are at risk of funding further invoices with the same flaw, until the issue is identified. This problem will increase the likelihood of bad debts for both us and Client.
Identification
Continually monitor the Client's records for signs of deteriorating product/service by review of credit note levels and reasons along with the levels and reasons for outstanding disputes. The debt turn could also deteriorate due to customers paying slower for a poorer service, or delaying payment until the issues have been resolved.
Treatment
The reason for any deterioration in product quality should be duly identified along with the scale of the problem. If the situation is not resolved promptly to our satisfaction, we should take steps to ensure it is as secure as possible, which may, dependant on the problem, lead to:-
- The creation of a reserve
- A reduction in the PPF
- Or ultimately termination of the agreement.
