Factoring Companies Guidebook
Promotional and Marketing Allowances
Definition
An allowance or contribution made by the Client to its customer for advertising or promoting their products, by cash or credit note. The amount could be a percentage based on sales turnover or a finite monetary sum relating to shared marketing costs.
Example:-
Buy One, Get One Free
Concerns
The customer may retain the amount required from their payment of assigned invoices or will require a credit note. A legal right of set off may apply in the event of a Client's demise.
Identification
Review the cash book for payments to customers
Review credit notes for large or round sum amounts.
Enquire if the Client contributes to any promotional, marketing or advertising work done by customers. This could include such events as new store openings, rather than promotions against individual product items.
Review customer terms and conditions.
Treatment
Obtain copies of any agreements, which exist between the Client and its customer. A monthly reserve should be set up where the amount is material.
Companies where such payments are found:
- Argos
- Booker Cash & Carry
- B & Q
- Any 'Shed' Type Operation
- Drinks/Brewing Industries
