Factoring Companies Guidebook
Sales Agent
Definition
Where a Client uses independent parties to sell products.
Concerns
Where agents are employed, there is a potential for the agent to collect cash and raise credit notes, neither of which filter back to us, thus eroding security on both counts. The Agent may not be responsible for the debt, but all of such sales are recorded through the Agents account, rather than the end customer. We may not have details of the individual debtors to enable it to collect the debt.
While Agents may simply be responsible for generating sales leads for the Client, in some particular countries, such as Italy, they often become involved in the collection of debts, either by cash receipts or banking into their own account. If the Client does not pay the Agents commission promptly, there is a likelihood of the Agent retaining the cash instead of passing it to the Client/Discounter.
Purchase orders from the debtors could be raised to the Agent, not the Client, causing concern over the Title of the Debt and our potential collect out position.
Identification
Review terms and conditions, contracts and formal agreements and investigate any informal arrangements.
Review purchase orders for sales placed through Agents to establish the title of the debt also review receipts to ensure these are made direct to the Discounter/Client.
Review purchase invoices from the Agent for reference to the end customer.
Review sales invoices for reference to the payment of commission.
Review the Purchase Ledger to ensure payments due to Agents are kept up to date.
Review credit notes for any reference to a reduction in the debt due to customer receipts retained by the Agent.
