CHOCC Invoice Finance

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CHOCC stands for Customer Handles own Credit Control. CHOCC Invoice Finance is a financing arrangement where a business sells its accounts receivable (unpaid invoices) to a factoring company without transferring the responsibility for credit control or collections. In a typical invoice factoring arrangement, the factoring company not only provides funding but also takes over the credit control and collection processes. However, in this scenario without credit control, the business retains control over those aspects.

How Does CHOCC Work?

1. Invoice Submission: The business provides goods or services to its customers and issues invoices as usual.

2. Factoring Agreement: The business enters into an agreement with a factoring company to sell its unpaid invoices.

3. Advance Funding: The factoring company provides an upfront cash advance to the business, typically a significant percentage of the invoice amount (e.g., 70-90%).

4. Credit Control Retained: Unlike traditional factoring, the business retains responsibility for credit control and continues to manage the relationship with its customers.

5. Customer Payment: The business collects payments from its customers based on the usual credit terms mentioned in the invoices.

6. Remaining Balance and Fee Settlement: Once the customer pays the invoice, the factoring company releases the remaining balance to the business, minus a fee. The fee covers the cost of financing and factoring services but does not include credit control.

Is CHOCC Right For My Business?

This approach allows businesses to access immediate funds through invoice factoring while maintaining control over their customer relationships and credit control processes. It can be particularly useful for businesses that want to improve cash flow without outsourcing credit control or collection activities to a third party.

However, businesses opting for CHOCC Invoice Finance should ensure that they have robust credit management processes in place to minimise the risk of late payments or non-payments by customers. While they retain control over credit control, it is essential to have effective procedures to monitor and collect outstanding payments from customers.

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