Reverse factoring is a buyer-led arrangement in which a finance provider pays suppliers early after the buyer approves invoices for payment. Pricing commonly reflects the buyer’s credit profile. The buyer then pays the finance provider on the agreed due date.
How does Reverse Factoring work in practice?
The buyer approves a supplier invoice and sends that approval to the program platform or finance provider. The supplier can elect early payment at a price based largely on the buyer’s payment obligation. At the original due date, the buyer pays the provider. The approved-payable status is central because financing occurs after the buyer confirms the invoice.
What the file should show
Keep the approved invoice, supplier election, funding date, discount, buyer obligation, due date and settlement evidence.
What does Reverse Factoring not establish?
The arrangement differs from ordinary factoring because it starts with the buyer’s approval. Accounting and disclosure treatment require separate assessment.
