What is Factoring?
A factor is an intermediary agent that provides cash or financing to companies by purchasing their accounts receivables. A factor is essentially a funding source that agrees to pay the company the value of an invoice less a discount for commission and fees. Factoring can help companies improve their short-term cash position by selling their receivables in return for an injection of cash from the factoring company. This practice is also known as factoring, factoring finance, and accounts receivable financing.
Factors are companies that provide the service outlined above. Denim is itself a Factoring company, but in some cases Payees (Contractors / Carriers) may themselves be using a Factoring service. When adding or updating companies through Denim's API, Denim needs to be aware of any factoring relationships to ensure the correct party receives payment.
A debtor is a client's customer or shipper. They are the entity that will be paying the invoices that have been factored by Denim. Debtors are a type of Company in our system and they can be referenced with a company_id.
Additionally, as part of the factoring process, Debtors will have credit limits. Generally, these credit limits are set or updated through our client's Denim Dashboard as there is a review/approval process. Denim's Credit Team must approve all credit limits. Later in the documentation, there will be additional details on what integrators need to know about these credit limits.
A payee is a client's contractor or carrier. They are the entity you need to pay. Payees are a type of Company in our system and they can be referenced with a company_id. As mentioned, Payees might themselves have a Factoring company and Denim will need to know about these relationships to ensure the Factor is paid directly, and not the contractor or carrier.
Client-Debtor and Client-Payee Relationships
Client-Debtor and Client-Payee relationships are relationships between Debtor or Payee companies and our shared Client in Denim. Since companies in Denim can have relationships with multiple Denim Clients, using these relationships becomes critical when creating Jobs later.
NOTE! Using these relationships and preventing duplicate company records in Denim are both critical in preventing funding delays. Duplicate records need to be reconciled by our operations teams and can slow the payment process.