Factoring Companies Guidebook

When the customer raises its own invoices for supplies made to it and where it does not acknowledge or recognise any other invoice sent by the client. No debt exists until the debtors raise their own 'Sales Invoice Transaction Advice' document.

Concerns

The invoices raised by the Client and assigned to us, will not be acknowledged by the Self Billing customer. The Client's invoice is disregarded and payment is made on the basis of the customer's own orders and a record of the goods received and accepted against those orders. The customer will raise their own internal document to take the place of the Client's invoice. Remittance advices will not usually make reference to the Client's invoice numbers.

The position is further complicated by deliveries going to different stores, goods being rejected and quantities not matching between the customers self billing invoice and the Client's "dummy" invoice. A number of self billing customers also have a tendency to take settlement discount, whether offered or not.

It is essential that both we and the Client fully understand the implications of self billing and our funding is adjusted accordingly. A regular reconciliation of the account must be carried out to ensure that it does not get out of line.

There may also be a high incidence of debit notes raised by the customer which will increase the level of dilution and will require action, to credit note quickly in order to protect our security.

Identification

Review sales orders and remittance advices and create an awareness of the customers and industries where self billing is prevalent.

Treatment

Establish at the outset how the self billing system operates from both the Client and customer.

Invoices should only be notified to us upon receipt of the Self Bill invoice from the Customer. Assigned invoices should clearly reference to the Self Bill Documentation.

Identify the basis on which the Client's invoices are raised and ensure that they clearly state the order number/call off reference/store code/quantity delivered, etc. or some clear means of identification. Also ensures that remittance advices can be properly married up to self bill invoices. Without this information it is impossible to match the paperwork.

Establish what procedures the Client has in place to deal with queries, in particular under/over/non delivery and quality issues.

Ensure debit notes are promptly actioned as credit notes.

Ensure that reconciliation of the Client's to customers ledger is up to date and that customer receipts are correctly allocated.

Ensure that if invoices are not quoted or identifiable on the remittance advice, the reason and problem is promptly identified and highlighted to the Risk Management team.

If we are not comfortable or satisfied with the control management of self billing customers, those accounts should not be funded.

Some companies that use self billing:

• John Lewis
• GUS
• Argos
• Ford Motor Company/Rolls Royce/Jaguar
• British Steel
• Mothercare
• BHS

Some industries that use self billing:

• D.I.Y
• Haulage
• Mail Order
• Motor/Automotive
• Catalogue outlet stores.