A/R Financing Glossary:

Accounts Receivable Financing & Factoring Glossary

Understand the key terms used in invoice financing, factoring, and working capital solutions for Canadian businesses.

1. Accounts Receivable (A/R): Money customers owe your business for goods delivered or services provided.
2. Accounts Receivable Financing: Financing that allows a business to access working capital using eligible unpaid invoices. It may involve borrowing against receivables or selling them through factoring.
3. Factoring / Invoice Factoring: An arrangement in which a business sells eligible invoices to a financing provider, known as a factor, to receive funds before the customer pays.
4. Invoice: A document that details goods or services provided, the amount owed, payment terms, and the payment due date.
5. Receivables Aging Report: A report that groups unpaid invoices by how long they have been outstanding, helping identify overdue balances and assess financing eligibility.
6. Advance Rate: The percentage of an eligible invoice’s value that a financing provider makes available upfront.
7. Recourse Factoring: A factoring arrangement in which your business must repurchase or replace unpaid invoices under the conditions set out in the agreement.
8. Non-Recourse Factoring: A factoring arrangement in which the factor assumes specified non-payment risks, such as certain customer insolvencies. Coverage depends on the agreement; disputes, fraud, and other exclusions may remain your business’s responsibility.
9. Collateral: Assets pledged as security for financing. In receivables financing, this typically includes eligible accounts receivable.
10. Factoring Fee: The charge for factoring services. The cost may depend on invoice value, payment timing, customer creditworthiness, and the agreement’s terms.
11. Account Debtor: The customer responsible for paying an invoice, such as a government agency, contractor, or private business.
12. Payment Terms: The agreed conditions for payment. For example, “net 30” generally means payment is due within 30 days of the date specified in the agreement.
13. Financing Limit: The maximum funding available under a financing arrangement, subject to eligible receivables and other agreement conditions.
14. Reserve: The portion of an invoice’s value held back from the initial factoring advance. The remaining balance is generally released after payment, less applicable fees and adjustments.
15. Accounts Receivable Turnover Ratio: A measure of how frequently a business collects its average receivables balance during a period, calculated by dividing net credit sales by average accounts receivable.

Canadian Legal Cannabis Glossary:

Government Receivables, Defence Contracts & Supply Chain Glossary

Explore the terms relevant to businesses supplying government organizations, defence contractors, and related supply chains.

1. Government Receivable: Money owed to a business by a government entity for goods delivered or services provided.
2. Government-Related Receivable: An invoice connected to a government project but payable by another business, such as a prime contractor. It is not necessarily owed or guaranteed by the government.
3. Government Contract: An agreement under which a business supplies goods or services to a government organization.
4. Defence Contract: An agreement to supply goods or services supporting defence activities, such as equipment, manufacturing, maintenance, logistics, or technology.
5. Prime Contractor: The business that contracts directly with the customer and is responsible for delivering the contracted goods or services.
6. Subcontractor: A business engaged by a prime contractor or another subcontractor to complete part of a contract.
7. Supply Chain: The network of businesses involved in producing and delivering goods or services, including manufacturers, suppliers, contractors, and logistics providers.
8. Public Procurement: The process government organizations use to purchase goods and services.
9. Request for Proposal (RFP): A document inviting suppliers to submit proposals explaining how they would meet a buyer’s requirements and at what cost.
10. Purchase Order (PO): A buyer-issued document specifying an order’s goods or services, quantities, prices, and terms. A purchase order alone is not an invoice for completed work.
11. Eligible Receivable: An invoice that meets a financing provider’s requirements, which may include customer creditworthiness, invoice age, completed delivery, and the absence of disputes.
12. Invoice Verification: The process of confirming an invoice’s details, supporting records, and payment status before financing.
13. Proof of Delivery or Completion: Documentation showing that goods were delivered or services performed. Customer acceptance may also be required.
14. Milestone Payment: A payment linked to a defined stage of a contract. Financing eligibility may depend on completion, acceptance, and invoicing of that milestone.
15. Assignment of Receivables: An arrangement transferring rights to receive invoice payments to another party, subject to applicable contract terms and requirements.
16. Notice of Assignment: A notice informing a customer that receivables have been assigned and providing instructions for payment.
17. Customer Acceptance: Confirmation that delivered goods or completed services meet the customer’s contractual requirements.
18. Holdback / Retainage: A portion of a contract payment withheld until specified conditions are satisfied. These amounts may not qualify for financing while withheld.
19. Set-Off: A reduction in the amount a customer pays because of an amount it claims is owed by the supplier, subject to applicable rights and contract terms.
20. Working Capital: Current assets minus current liabilities—a measure of a business’s short-term financial position. Receivables financing can help convert unpaid invoices into cash for payroll, suppliers, and operating expenses.