Invoice Factoring Notice of Assignment
Invoice Factoring Snippet
- A Notice of Assignment legally requires your customer to send payments directly to the factoring company.
- Getting in the way of that process, or redirecting payments can strain your relationship with both the factor and your customer.
- If you happen to receive a payment that should’ve gone to the factor, just let them know right
Because factoring isn’t a loan, the factoring company gets repaid directly by your customers. If your factoring company advanced you funds but still let you collect the payments yourself, the relationship would quickly get out of balance.
To make that official, the factor must notify your customers in writing, this is called a Notice of Assignment. It simply lets them know that your invoices have been sold and assigned to the factoring company, and that payments should go directly to them.
Once that notice is in place, your customer is legally required to pay the factoring company until they’re told otherwise, and only by the factor. Occasionally, a client might (intentionally or by mistake) tell their customers to send payments to them instead. Some factors call this a “redirection” or “payment over notice”. It’s a serious issue because it can strain both the relationship with the factor and the customer.
Here’s the key takeaway: under the Uniform Commercial Code, Section 9-406(a), once your customer receives that Notice of Assignment, their obligation is only fulfilled when payment is made to the factoring company, not to you. So, if a customer sends payment to you instead, even by accident, and it’s not forwarded to the factor, that customer could end up having to pay the factor again.
It’s actually pretty common, a customer has been paying your factoring company directly, everything’s running smoothly, and then out of nowhere, a payment shows up in your account instead! Usually, it’s not intentional. Large companies often have multiple operating entities, and their systems don’t always “talk” to each other. So, an old remittance address or outdated vendor record can easily slip through.
When that happens, the best move is simple: let your factoring company know right away, share the payment details, and forward the funds to them immediately. No harm, no foul, as long as you’re upfront and quick to act.
If you hold onto the payment, though, it can create problems. When cash is tight, it can be tempting to think, “I’ll just hang onto this payment and make it up to my factoring company later.” But be careful, that kind of thinking can get you into trouble.
You could face additional fees, and worse, it might call your integrity into question, which is never worth it for a simple oversight.
ATTENTION ACCOUNTS PAYABLE MANAGER
Dear Sir/Madam:
In order to accommodate the growth we are experiencing in our business, we are pleased to announce that we have retained the firm of Gateway Commercial Finance, a Florida Corporation (“GCF”) to help manage our accounts receivables. The availability of this service will allow us to serve our customers in a more efficient and timely manner. To ensure accurate application of your timely payments, your accounts have been assigned to GCF and GCF has purchased all rights, titles and interest in ABC Co, accounts receivables.
This letter hereby authorizes and instructs you to remit all payments of all present and future invoices due to «Company_Name» d.b.a «Trade_Name» directly to GCF and continue to do so until notified in writing only by Gateway Commercial Finance. Please make checks payable to:
Payments Via Mail Electronic Payments
Gateway Commercial Finance Gateway Commercial Finance, LLC
f/a/o ABC Co Account # 180302039
P.O. Box 1000, Dept. 996 First Horizon Wire: 084000026
Memphis, TN 38148-0996 Benefit of: ABC Co
Gateway Commercial Finance and my team may be contacting you to verify ABC Co., invoices and account status. Your cooperation is greatly appreciated and we thank you for your assistance and continued business. Should you have any questions please do not hesitate to contact Customer Service at Gateway Commercial Finance directly at 561-734-2706.
This Notice of Assignment which changes the payee on our Accounts, is effective immediately and due to potential cyber-scamming, this may not in any way be changed, modified, altered, revoked (collectively, “Changed”) by any form of electronic communication. This Notice of Payment redirection may only be changed by Gateway Commercial Finance’s written instructions issued by an authorized representative of Gateway Commercial Finance and delivered to you by Certified Mail. Watch for similar but fake e-mail addresses. When in doubt call the above number directly. Payment to anyone other than Gateway Commercial Finance will not discharge your obligation to pay such account or payment intangible.