Financial Glossary

An example of a trade credit offered by a supplier or seller. The buyer or customer recives a 2% discount if they pay the full invoice amount within 10 days. Otherwise, the full balance is due in 30 days.

A person or firm that is designated as the intended recipient of funds paid towards documents such as invoices and purchase orders.

"Third-Party Logistics" - a partner or service that provides outsorced logistics and supply chain services such as storing or shipping goods.

A report that displays a company's accounts payable (A/P) by the number of days outstanding. This is a key metric to determine financial health and a firm's ability to meet debt obligations. A/P agings also take partial payments or discounts into account.

A report that displays a company's accounts receivable (A/R) by the number of days outstanding. This metric, like the A/P Aging, helps to determine a firm's financial health and to view what they owe to vendors and suppliers. A/R agings also refelct partial payments made or discounts taken.

The money that a company owes to its customers for goods or services rendered on credit terms. Accounts Payable is entered as a liability on the buyer's Balance Sheet.

The money that a company is owed by its customers for goods or services rendered on credit terms. Accounts Receivable is entered as an asset on the seller's Balance Sheet.

Also called Debtor's Turnover Ratio - this is a measure of the effectiveness of a company's ability to collect on its owed debts.

The funds that a factoring company sends to the client when their invoices are purchased.

The percentage of each purchased invoice's gross amount that will be advanced to the client. Advance rates can be as high as 95%.

An accounting transaction used to withdrwa funds from any Unapplied Cash (UC) balances stored on the account and apply against open invoices.

An accounting transaction used to withdraw funds from a client's Earned Reserve Balance to apply to open invoices.

Anything of value that a company or individual owns, such as cash, property, or investments.

This type of financial lending allows borrowers to leverage their assets without diluting equity in the company. This allows for increased financial flexibility through working capital without changing the ownership structure.

A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.

B2B, or Business to Business, sales indicate that a business sells its goods or services to other business, not direct to consumers. Invoice factoring is only available to Business to Business or Business to Government (B2G) sales.

B2C, or Business to Consumer, sales indicate that a business sells its goods or services directly to consumers, not to other business or governmental bodies. Invoice factoring is only available to Business to Business (B2B) or Business to Government (B2G) sales.

B2G, or Business to Government, sales indicate that a business sells its goods or services to governmental bodies or entities, not direct to consumers. Invoice factoring is only available to Business to Government or Business to Business (B2B) sales.

The amount that a buyer is expected to pay, typically expressed in hourly or daily rates, for services rendered. This is common in the temporary staffing industry.

The process of recording, managing, and reporting of a company's financial transactions. Sound bookkeeping is vital for business planning, investing, and financial decision making.

Short-term funds that provide immediate financing for situations not addressed by conventional lenders. These include, but are not limited to: acquisitions, tax liens, renovation, and restructuring.

A traditional credit line serviced by a bank. Typically has long approval times and stringent requirements inclduing 2 years of tax returns, audited financials, personal financial statements, cash flow, and projections. Alternatively, you can obtain an invoice factoring facility based solely on creditworthy invoices or A/R aging.

The money or other assets that a company or individual uses to start or maintain a business.

An accounting transaction used to move Unapplied Cash (UC) from one account to another. A negative CA reduces the balance held while a positive CA increases the balance.

The amount of cash a company generates or uses in a specific period of time, typically a month or a year.

A ratio that measures cash from operating activities as a percentage of total sales revenue in a given period.

An accounting transaction used to withdraw funds from a client's Earned Reserve Balance to collect on otherwise uncollectible invoice balances. These invoices still appear on customer reports.

An accounting transaction used to reverse a posted Chargeback (CB) transaction.

The company who sells their invoices to a factoring company.

A wide range of assets that may be used by a borrower to secure a loan or credit line. In invoice factoring, your contracts and invoices serve as this collateral.

The percentage of a client's overall portfolio that each customer accounts for. Concentration is used as a risk measure and is reviewed on a case by case basis.

A trading arrangement in which a seller sends goods to a buyer who pays the seller only whent the goods are sold. The seller typically remains the owner of the goods until they are paid in full. If the goods remain unsold after a certain period, the seller can reclaim them. Also referred to as: Guaranteed Sale, Sale or Return, or Goods on Consignment. These arrangements are typically not financeable and can be risky.

In A/R financing, a contra account is when a factoring company's client and their customer (Account Debtor) owe each other payments. Any situations of both buying and selling to a customer should be disclosed immediately.

Also called Trade Insurance, is an insurance policy for companies who wish to proect their A/R from loss due to risks such as customer bankruptcy.

The maximum amount of money a lender will issue to a business or individual customer (Account Debtor).

An accounting transaction wherein funds are withdrwan from a client's Earned Reserve Balance to apply to open invoices. Typically, CMs are issued by a seller (client) in order to decrease the gross amount of an invoice due payable by the customer. Commonly due to returned goods, allowances taken, or price disputes. CMs should be sent to the factoring company as soon as possible.

An accounting transaction used to reverse a posted Apply Reserve (AR), Credit Memo (CM), or Discount (DI) transaction.

An agreement between the buyer and seller that list the amount owed, when payment is due, and any discounts or fees related to early or late payment. Examples include Net 60 and 2/10 Net 30.

A measure of the number of days that it takes for a company to collect revenue after a sale is made. It is calculated by dividing the number of sales on credit terms during a period by the total value of those credit sales (A/R) during that period, and multiplying the result by the number of days in the period. A low DSO value is evidence that a company collects on its A/R quickly. Invoice factoring with Porter Capital helps to decrease your DSO by employing our full collections team on your behalf.

This is an agreement between a company and its lender(s) that the company will operate within stated rules. Also called a financial covenant.

This metric shows how much of a business is owned by creditors compared to how much of the company's assets are owned by shareholders.

Money that a company or individual owes to others, typically in the form of loans or bonds.

These are any amounts subtracted from an invoice's total value. These are usually taken by the customer without the factor's knowledge. Any deductions that are known, or expected, to be taken should be disclosed.

This is an agreement between a customer (debtor), a secured party (lender) and a bank that allows the lender to have a secured interest in the customer's funds by controlling the deposit account.

A non-cash expense that reflects the reduction in value of an asset over time.

This is all of the discounts, chargebacks, credit memos, allowances, and other deductions that reduce the final owed amount of an invoice.

An accounting transaction used to show a reduction in the owed amount of an invoice. These funds are taken from the client's Earned Reserve Balance to discount the invoice. The two most common types of discounts are: 1. Early payment, pre-payment, or cash discounts that are listed in the invoice's "Terms of Sale.". 2. A trade discount offered by the client to all, or select, customers especially for volume-based reasons.

This is the researching of a business and its owners prior to a lender advancing funds. MCA lenders tend to have minimal due diligence and high fees/interest. Conversely, banks tend to have the most time-consuming due diligence processes at the lowest rates. Invoice factoring can be the best of both worlds - it offers both expedient due diligence and easy access to capital held up in A/R.

Earnings Before Interest, Taxes, Depreciation, and Amortization. This metric is used to evaluate a company's profitability and operating performance.

This is a nine-digit number assigned to a business by the IRS. It is used to identify tax paying entities and their business tax returns.

A type of