Factoring
Content
Factoring Business Process Document Version 1.0
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Introduction Factoring is the purchase of accounts receivable for immediate cash. Account receivables are invoice, LC, PO. Process: Registration Registration process involves the process of issuing empty application by the executive (clerk) as per the factoring to the client. The client fills the application and returns to the executive (clerk). The clerk does data entry of the application. The system has to generate application id & client id (new client only). The executive (clerk) paralley captures the documents submitted by the client. Executive (clerk) paralley scans & uploads the document. These documents are tagged along with the application id. The executive (officer)/ approver approve the application and the application details are forwarded to appraisal department/process. Process: Appraisal Incase of appraisal process the executive captures the list of application’s to be processed for the appraisal process. The executive (clerk) orders for the appraisal process to pre-listed credit bureau agencies. The executive (clerk) keeps track of the appraisal order list and waits for the appraisal report. As per the UCC/ SSN the appraisal process executed by the credit bureau agents and returns the rating reports to the executive (clerk). The executive (clerk) enters the rating report details against the client id and tag to particular application id. The rating report verified by the executive (officer) and assigns the sanction limit else rejects the client based on the rating. The executive (officer) appends the remark of the sanction. The executive (clerk) creates the loan account number and tags the sanction details to the loan account. Once the loan account created the details are notified to the client. Process: factor The client produces the AR(Account Receivables) documents to the executive referring against the loan account number. The clerk collects the AR documents and does an advance entry against the loan account no and the executive applies the factor charges & other processing charges to advance entry. Each advance entry uniquely identified by the advance entry id. In case the invoice for LC/PO then this invoice/LC tagged against corresponding PO. The advance entry is verified against the outstanding balance of the loan. Incase the advance claimed by the client more than outstanding /additional outstanding balance then the advance declined. The advance entry less than the outstanding then according to the approval of the executive (officer) the advance is sanctioned to the client against the AR. The executive generates the advance sanction receipt. The paralley process that happens is notification. The factor process is regular cyclic process. Process: Notification Notification is the process of informing to the parties involved in the cash transaction. Usually the parties involved are client, customer, brokers, and co-factor. The notification involves generating of various reminders .messages and sending to the parties. The notification types are mentioned in the appendix /notification. Process: Provision Provision is process of changing the advance entry incase the change occurs in the PO/invoice/LC. The changes are incorporated by the executive (clerk) and approved
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by the executive (officer). The provision changes are to be tracked by the executive (clerk). Process: collection/payments The client has to pay the credits to the factor (bank) at the mentioned time. As the payments are done against the credits the executive (clerk) assigns the payments against the advance entry. The collections are categorized as partial payments and the complete payments. Incase of the partial payments the advance entry broken down into the paid & non-paid partial entries. The factor charges are billed for the partial payments until the client pays off the credits.
Appendix A Abbreviation LC-Letter of Credit PO-Purchase Order
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Introduction Factoring is the purchase of accounts receivable for immediate cash. Account receivables are invoice, LC, PO. Process: Registration Registration process involves the process of issuing empty application by the executive (clerk) as per the factoring to the client. The client fills the application and returns to the executive (clerk). The clerk does data entry of the application. The system has to generate application id & client id (new client only). The executive (clerk) paralley captures the documents submitted by the client. Executive (clerk) paralley scans & uploads the document. These documents are tagged along with the application id. The executive (officer)/ approver approve the application and the application details are forwarded to appraisal department/process. Process: Appraisal Incase of appraisal process the executive captures the list of application’s to be processed for the appraisal process. The executive (clerk) orders for the appraisal process to pre-listed credit bureau agencies. The executive (clerk) keeps track of the appraisal order list and waits for the appraisal report. As per the UCC/ SSN the appraisal process executed by the credit bureau agents and returns the rating reports to the executive (clerk). The executive (clerk) enters the rating report details against the client id and tag to particular application id. The rating report verified by the executive (officer) and assigns the sanction limit else rejects the client based on the rating. The executive (officer) appends the remark of the sanction. The executive (clerk) creates the loan account number and tags the sanction details to the loan account. Once the loan account created the details are notified to the client. Process: factor The client produces the AR(Account Receivables) documents to the executive referring against the loan account number. The clerk collects the AR documents and does an advance entry against the loan account no and the executive applies the factor charges & other processing charges to advance entry. Each advance entry uniquely identified by the advance entry id. In case the invoice for LC/PO then this invoice/LC tagged against corresponding PO. The advance entry is verified against the outstanding balance of the loan. Incase the advance claimed by the client more than outstanding /additional outstanding balance then the advance declined. The advance entry less than the outstanding then according to the approval of the executive (officer) the advance is sanctioned to the client against the AR. The executive generates the advance sanction receipt. The paralley process that happens is notification. The factor process is regular cyclic process. Process: Notification Notification is the process of informing to the parties involved in the cash transaction. Usually the parties involved are client, customer, brokers, and co-factor. The notification involves generating of various reminders .messages and sending to the parties. The notification types are mentioned in the appendix /notification. Process: Provision Provision is process of changing the advance entry incase the change occurs in the PO/invoice/LC. The changes are incorporated by the executive (clerk) and approved
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by the executive (officer). The provision changes are to be tracked by the executive (clerk). Process: collection/payments The client has to pay the credits to the factor (bank) at the mentioned time. As the payments are done against the credits the executive (clerk) assigns the payments against the advance entry. The collections are categorized as partial payments and the complete payments. Incase of the partial payments the advance entry broken down into the paid & non-paid partial entries. The factor charges are billed for the partial payments until the client pays off the credits.
Appendix A Abbreviation LC-Letter of Credit PO-Purchase Order
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