About Repurchases
What is a repurchase?
When invoice aging goes beyond the limits your financial institution has set for your business, the financial institution can debit your business's reserve or DDA account to repurchase (transfer ownership back to your business). A repurchase is the transfer of ownership of the receivable from the financial institution to your business after X days.
What
is the difference between repurchase eligibility by invoice date or by
due date?
The repurchase age typically differs when using due date versus invoice date aging. For example, if an invoice is due in 30 days, your financial institution may decide to repurchase 90 days from the due date (which is also 120 days from invoice date).
- Invoice date eligibility is simply the number of days beyond the transaction date: <Current Date> – <Transaction Date>. For example: Today is June 30. An invoice created on June 1 is 29 days old (30-1).
- Due date eligibility considers the payment term: <Current Date> - (<Transaction Date> + <Days in Payment Term>). For example: Today is June 30. An invoice created with a Net 15 payment term on June 1 is 14 days old (30-(1+15)).
When will the invoices "eligible for repurchase" actually be repurchased?
Your financial institution sets the repurchase age. When an invoice reaches that age, it could be repurchased any time — possibly today (all events occur in near-real-time online). Further, if a single customer is a risk, the financial institution can repurchase ALL of that customer's invoices any time, regardless of age. In most cases, the balance of repurchased invoices is debited from your reserve account. When an invoice is repurchased, your business owns the invoice and is responsible to collect the amount due from the customer. Repurchased invoices continue to appear on customer statements until they are paid or resolved. The financial institution credits your account for payments received on repurchased invoices.
Why should you take collection action on anticipated repurchases?
Slow paying receivables increase your A/R Turn, which is a factor used to determine your BusinessManager service charge. Your financial institution has the contractual right to recourse for delinquent invoices. The invoices and balances in the Eligible for Repurchase list are likely to be charged soon, possibly today, to your Reserve account, and your DDA if the Reserve is insufficient. Attempting to collect on these invoices and balances is both urgent and prudent.
How does a repurchased invoice or balance affect the customer?
The fact that an invoice or balance has been repurchased should be transparent to the customer because repurchased invoices and balances remain in BusinessManager and continue to appear on customer statements. Payments for repurchased invoices and balances are credited to your account.
