The Invoice Approval Process

The invoice approval process boils down to three steps.

1. Verification by factor that invoice and supporting documentation is complete and accurate.
2. Billing of the customer.
3. Verification by customer that invoice amounts are correct, and all required documentation is present and accurate.

In the case of a first-time funding of a customer, a factoring company has the additional step of sending a client’s customer a Notice of Assignment and verifying that it has been accepted.

Factoring companies need verification of the accuracy of the invoice amounts and that the customer intends to pay the invoiced amount. Since a factoring company uses those customer approvals to verify what amounts they can advance on an invoice, the approval is critical to the efficient functioning of a factoring company. Since the invoice approval is a formal verification of the accuracy of the information provided and a promise to pay the amounts listed, it is critical that a factor does not fund on an invoice until this approval is received. Any underpays, adjustments, or other payment irregularities need to be known about prior to funding.

The answer to this question depends on a number of variables. Once the invoice has been billed by the factoring company, the approval process is highly dependent on the response time from the customer. Since internal approval processes vary highly from company to company, giving a firm time frame is impossible. However, in the vast majority of cases, the process is complete in less than 48 hours.

When a customer approves an invoice they are vouching for the validity of the invoice amount, the accuracy of the documentation submitted, and informing the factoring company that the amount approved is what will be paid when the invoice term is reached. It informs a factoring company what a particular invoice is actually worth and allows them to advance funds to their client based on that knowledge.

Unfortunately, if a factoring company is unable to get an invoice approved by the debtor on the invoice, they will be unable to factor it. Since the invoice approval is intended to verify the amounts being billed, without it a factoring company would have no idea whether the work or amounts were valid, and would therefore be unable to fund on it. However, your factoring company would still be able to bill your customer and you would be paid in your normal invoice term.