Many business owners often wonder if their customers will be notified that a factor bought their invoices. The quick answer is yes, and it’s done through a Notice of Assignment or NOA, which is actually a crucial process that will protect you, your business, and your client relationship.
In this post, we’ll discuss more about how NOA works, its importance, and what your customers will think about it. Keep reading to see why this is actually an advantage and why your choice of factoring company matters!
What is a Notice of Assignment (NOA) in factoring?
Notice of Assignment or NOA is a document that factoring companies, like Factoring Express, send to the customer once they purchase an invoice from a business.
The NOA that factoring companies send is intended to inform your customers that the invoice ownership has changed. As such, they will have to follow a different payment scheme to the factor instead of the company to which they initially owed the amount.
Here are the main purposes of sending a notice of assignment to your customers after factoring:
- To advise your customer (aka account debtor) that his invoice has been handed over to a factoring company
- To inform your customer that payments are now to be made to the factoring company
- To inform your customer of the new remittance details where they should send payments
Please note that the NOA should be assigned by the factor and the client. It will only be executable once your customer has sent proof of receipt of the document, which can be a signed copy.
The importance of the Notice of Assignment
A Florida factoring company like ours issues a Notice of Assignment for the benefit of creditors (your business) and debtors (your customers). Here’s why it’s beneficial for everyone involved:
1. It fulfills your legal obligation.
Sending a NOA to your customers fulfills your legal obligation to inform them of the change of hand on their invoices. This is similarly necessary as the letter of release a factoring company sends to a client to terminate the partnership.
Overall, a NOA will ensure that the factoring process will be valid and will prevent potential legal problems if an uninformed customer disputes the setup.
2. It helps customers realize that factoring equates to growth.
A Notice of Assignment is also a great opportunity to explain to your customers the value of factoring. You can help them realize that factoring services support growth among businesses, which can also be beneficial to them in the long run.
Moreover, a NOA can also indicate that your customers can avail of a more flexible payment option if the factoring company allows. This way, they will realize that factoring is also beneficial to them, especially when it comes to paying high-value invoices.
3. It helps streamline your accounts receivables.
A NOA serves as the official record of your factoring service, which you can use as a reference if there are disputes in the future.
At the same time, it clarifies the ownership of the accounts receivable so your collections team will not get confused. It also allows you to track and manage your ARs by knowing which ones are factored in and which ones are still in your in-house collections.
4. It prevents confusion among your customers.
Notice of Assignments also prevents confusion among your customers, especially in terms of where they should make payments or seek customer support. It gives them clear instructions where and how to make payments.
Overall, NOAs prevent misunderstanding by clarifying the responsibilities of all parties involved.
5. It promotes transparency.
In addition to informing your customers about the invoice’s transfer of ownership, NOA also provides them with all the information they need for transparency.
This includes payment directions, the amount owed, disclosure of new parties, regulatory requirements, and more.
How a NOA for factoring impacts your client relationship
Factoring companies value the importance of the debtor relationship when it comes to collecting invoices. Businesses are understandably worried about what their customers will think upon knowing that a third party will be involved in the collections.
But if done right, your customers will see factoring services as equally advantageous for them. But for that to happen, you also have to do your part by helping them understand the following:
1. Factoring benefits them.
Most factoring companies, like Factoring Express, will suggest that you inform your customers ahead of time that they will be receiving a NOA soon. This way, you can explain to them the process and benefits of factoring.
For example, you can tell them that when receiving and confirming the NOA, they will also be eligible for longer payment terms. This way, they can use their cash on other important business matters without having to be chased for payments urgently.
At the same time, you should highlight that such lenient payment terms are only possible with the help of factoring. With that, they will be more informed and supportive of this financial solution.
2. Your company is financially secure.
Before sending a NOA, you can also remind customers that your company is not in any sort of legal or financial trouble. It’s important to highlight to them that factoring, much like any type of financing, is intended to boost your cash flow. At the same time, you should also explain that this financial solution is part of your business growth and expansion.
You can also explain that factoring is widely used in a variety of industries. For example, factoring for trucking is a popular financial solution among truckers, as invoices often take 30, 60, or even 90 days to get paid. In turn, shippers and brokers are used to this setup and understand that it’s part of running a steady business.
In this case, receiving Notice of Assignment trucking factors is a common occurrence to them.
3. They are dealing with a professional.
It’s also important that you inform your customers that a professional company will be collecting their invoices. This will help build trust and confidence, especially if this is your first time factoring invoices.
On our part, as a factor, we always protect your customer relationship through professional and ethical collections. We observe clear communication, and we help you build good relationships with your customers as an extension of your team.
Frequently asked questions about NOA in factoring
What information should be included in an NOA?
In general, a Notice of Assignment (NOA) for factoring should include, but not be limited to, the following details:
- Parties involved
- Important dates
- The amount that the customer has to pay
- Payment instructions (including how and where to send)
- Payment terms (if applicable)
- Contact information of the factoring company
What if my customer did not receive the NOA after factoring?
If your customer does not receive the Notice of Assignment, they will still direct the payment to you. This can cause confusion and possible disputes.
This is why it’s important to choose a reliable factoring company that will send NOAs and ensure that your customers receive them promptly.
Can a customer refuse to pay a factoring company after receiving an NOA?
If your customer refuses to pay the factor after receiving an NOA, they could face legal problems. Take note that an NOA is a legal document that explains a customer’s obligation to settle their outstanding balance. If the customer ignores it, the factor can enforce their rights to collect the unpaid invoice.
How is the Notice of Assignment sent to customers?
At Factoring Express, we can send it via email, fax, or snail mail. Once sent, NOAs can’t be revoked unless mutual consent is obtained from both parties involved.
What should I do if I receive payments from customers after the NOA is sent?
If the customer mistakenly sent you the payment for the factored invoice, make sure you inform the factoring company right away. Most of the time, factors like us will ask you to forward the payment to our account, and we will follow up with the customer about the proper remittance details.
Can a customer dispute a Notice of Assignment?
Technically, your customer can challenge the NOA if they have concerns about the invoice amount itself. Regardless, they will still be required to pay the balance based on the terms outlined in the NOA they received.
Protect your cash flow & client relationship with Factoring Express
When you partner with Factoring Express, you protect both your cash flow and customer relationship. Our goal is to help your business receive its much-needed working capital while keeping customers happy with the payment terms.
We will send NOAs promptly and ensure that your customers are informed about their financial responsibilities. This will allow us to collect the invoice quickly, and you can focus on running and growing your business.
If this sounds good to you, contact us at Factoring Express today. Reach out to us, and let’s discuss how factoring can help your business complete with a 1-week free trial!
