Consignment Sales No Go

If you have a product oriented business like small manufacturing or importing and you want to use factoring to boost production, in order to do so all sales must be final. If accounts receivable financing is in place, then the account debtor or customer must acknowledge they have accepted the entire shipment as delivered. When selling products on consignment, meaning the customer can return any of the product that doesn’t sell, you will run into problems with a factoring company. The factor is making an advance on the face value of an invoice based on the shipment being delivered. If the customer subsequently credits a portion of that invoice for unsold product returned, the factor will not be repaid the full amount. Full repayment is the goal of the factoring company, so every invoice must have a clear verification from the account payables department of the customer showing the entire sale has passed through all the acceptance steps resulting in an invoice which is final, unconditionally.