Invoice Factoring Operations

Introduction

Invoice Factoring (or Accounts Receivable Financing) is a capital-intensive lending business with thin margins. Success depends on operational efficiency: how quickly can you verify an invoice, advance funds, and reconciling the final payment?

NAYA provides the ledger primitives to manage the complex three-party relationship between the Factor (You), the Client (Seller), and the Debtor (Buyer).

The Operational Challenge

Factoring involves a web of accounting entries for every single invoice:

1. The Purchase: Buying the invoice face value ($10,000).
2. The Advance: Paying the client the advance rate (e.g., 80% = $8,000).
3. The Reserve: Holding the remainder ($2,000) in a reserve account.
4. The Collection: Receiving payment from the debtor ($10,000).
5. The Rebate: Releasing the reserve to the client, minus fees (e.g., pay out $1,800, keep $200).

Managing these flows across thousands of invoices in Excel or a legacy ERP is slow and risky. A single missed payment or miscalculated fee erodes your spread.

The NAYA Solution

NAYA treats every invoice as a distinct asset on the ledger, automating the lifecycle from purchase to rebate.

1. Invoice-Level Ledgering

NAYA creates a "Sub-Ledger" for every invoice you purchase.

• Granular Tracking: Know the exact status (Purchased, Advanced, Paid, Overdue) of Invoice #1234.
• Document Linkage: Link the ledger entry to the verified invoice document in your Data Hub.
• Aging Analysis: Automatically categorize invoices into aging buckets (0-30, 31-60, 60-90, 90+) to monitor portfolio health.

2. Automated Fee Engine

Factoring fees are often time-based (e.g., 1% for every 10 days outstanding). Calculating this manually at settlement is prone to error.

• Daily Accrual: NAYA calculates and accrues fees daily based on the outstanding age of the invoice.
• Discount Fees: Automatically deduct the discount fee from the reserve release.
• Service Fees: Apply fixed service or processing fees to the initial advance automatically.

3. Reserve Management

The "Reserve" is your security blanket. NAYA manages it programmatically.

• Auto-Lock: Reserves are locked by default.
• Triggered Release: When the Debtor's payment reconciles, the system automatically unlocks the reserve and schedules the rebate payout to the client.
• Offset Logic: If an invoice goes bad (Recourse Factoring), NAYA can automatically offset the loss against the client's other available reserves.

4. Collection Reconciliation

Debtors often pay multiple invoices in a single wire transfer.

• Bulk Matching: NAYA's Reconciliation Engine can take a single $50,000 wire and match it against 5 distinct invoices of $10,000 each.
• Short Pay Handling: If a debtor pays $9,950 on a $10,000 invoice, NAYA flags the variance. You can configure rules to auto-accept small variances or trigger a dispute workflow.

The Workflow

1. Ingest: Client uploads Invoice #A1 ($10k) to your platform.
2. Verify & Book: You approve. NAYA books:
   • Debit: Receivables ($10k)
   • Credit: Cash ($8k - Advance)
   • Credit: Reserve Liability ($2k)
3. Wait & Accrue: For 30 days, NAYA accrues fees ($100).
4. Collect: Debtor pays $10k. NAYA reconciles the cash.
5. Settlement: NAYA releases the reserve:
   • Reserve ($2k) - Fees ($100) = $1,900 payout to Client.
   • Revenue recognized = $100.

Schema Example

How NAYA models a Factoring Agreement in the ledger:

{
  "agreement_id": "fac_001",
  "client_id": "cl_ABC",
  "parameters": {
    "advance_rate": 0.80,
    "reserve_rate": 0.20,
    "discount_fee_apr": 0.12,
    "service_fee_fixed": 50.00
  },
  "invoices": [
    {
      "id": "inv_1001",
      "face_value": 10000,
      "status": "advanced",
      "ledger_accounts": {
        "receivable": "acc_rec_1001",
        "reserve": "acc_res_1001"
      }
    }
  ]
}

Risk & Compliance

• Concentration Limits: Set rules to alert you if too much exposure is tied to a single Debtor.
• Verification: Ensure funds are advanced only after verification checks (KYC/KYB) are passed via our AI Compliance system.

Modernize your factoring operations with infrastructure built for scale, not spreadsheets.