Factoring Companies Guidebook

Goods provided to the customer in order to demonstrate quality or sale ability for the purpose of generating future sales.

Alternative terms:-

• Sale on approval
• Also similar to 'Sale or Return'

Concerns

Where these are provided free of charge, there is no risk to us.

If the goods are invoiced on delivery and the client ceases to trade, the samples would effectively become useless and debts would be difficult, if not impossible, to collect. Care should however be taken in the Drinks trade where samples are removed from Bonded Warehouses, or any other business where goods are held in Bond. As soon as bonded goods are removed from the bond, an Excise Duty liability arises, whether or not these goods are supplied to the customer free of charge. An invoice must legally be raised for the Duty element. Such a debt is obviously uncollectable and we must take care not to take assignment of these invoices.

Identification

Review the sales invoices for ones where samples have been included and acquire an understanding of the nature of the business.

Treatment

Any invoices in respect of samples or goods sold on approval should be reserved in full.