Invoice verification is the step in which a factor confirms that an invoice is legitimate before it advances money, or shortly after. The goal is to be sure the goods or services were delivered, the amount is correct, and the customer has no reason to withhold payment.
How it works in factoring
Verification methods depend on the industry and the factor's risk tolerance. Common approaches include:
- Documents: signed delivery receipts, bills of lading, goods received notes, approved timesheets, or proof of completion
- Customer portals: checking that the invoice has been entered and approved in the customer's payables system
- Direct contact: a verification call or email to the customer's accounts payable staff confirming the invoice number, amount and expected payment date
- Purchase order matching: confirming the invoice agrees with the order the customer issued
Factors may verify every invoice for a new client, then shift to sampling as the relationship builds a track record. Large or unusual invoices often get extra attention.
Why it matters
Fraud and billing errors are among the biggest risks in factoring. Invoices for undelivered work, duplicated invoices, or invoices that the customer disputes can leave the factor unable to collect, and they usually trigger the seller's repurchase obligations.
What to check
- How the factor plans to contact your customers, and in what tone
- What documents it needs with each submission, so funding is not delayed
- Whether verification happens before funding or after
Submitting complete paperwork with each schedule is the fastest way to get funded.