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• 10 May

  Audits Not Liked By Invoice Finance Prospects

  Putting aside costs, "funding limits" were the biggest pet hate amongst invoice finance prospects within the SME. The second most common response was "audit". The audit is a visit by the factoring or more commonly the invoice discounting company in order to go through the records of the invoice finance using company. The purpose of the audit visit is to better control the risk of the invoice finance company.

  Typically during an audit visit the auditor will check details of the debtor sales ledger operated by the client company (assuming its an invoice discounting facility) and ensure that this matches the balances held by the invoice discounter. The auditor will also look at the creditor ledger and outstanding supplier payments in order to identify any cash flow pressures on their client. This will normally include checking the situation regarding outstanding preferential creditor payments such as VAT, PAYE and tax. The auditor may also check the purchase ledger against the sales ledger in order to identify any contra trading accounts that appear on both ledgers (and hence in some cases may not be eligible for funding).

  The audit process can place a burden on the client company hence it is on the list of their top pet hates. However, the process and frequency differs between providers and some facilities do not require regular audits anyway.

  By Glenn Blackman