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Accounts receivable outsourcing

Glossary of Terms

Advance

Amount of money immediately paid out to clients upon invoice deposit at IPS Invoice Payment System. This amount is typically expressed as a percentage of the total invoice deposit amount.

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Assignment

Transfer of ownership of an invoice from its original owner to IPS Invoice Payment System.

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AUTOMATED CLEARING HOUSE (ACH)

One of the two methods for Electronic Funds Transfer (EFT) that allows an individual or an institution to transfer money electronically in large batches. ACH is generally a cheaper and slower method of money transfer compared against the other EFT method, Electronic Wire Transfer.

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BALANCE SHEET*

Financial statement providing a summary of the financial position of a business at a particular point in time. Balance sheets consist of three parts: assets, liabilities and ownership equity, where assets equal the sum of liabilities and ownership equity.

*Definition according to GAAP.

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Bill of Lading

Document issued by a shipper indicating the delivery of merchandise and assigning the title of that merchandise to a receiving party.

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Bill of Sale

Document used to transfer the title of goods from the seller to the buyer.

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Break-Even Point

Level of sales where costs and revenues are equal, resulting in neither a financial loss nor gain.

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Cash Flow

Amount of money that constantly flows in and out of a business, affecting the level of liquidity of a company.

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Chargeback

Negative financial adjustment applied to clients’ accounts for invoices that were either not paid within 90 days or were short paid.

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Collateral

Pledge of a certain property given to a lending party in order to back up their financial transactions or guarantee repayment of borrowed resources.

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Commercial Credit Insurance

Insurance designed to protect a party from potential losses incurred as a result of uncollectible invoice receivables.

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Concentration

Total invoice receivables amount due from a single customer; a large concentration in a single customer may pose a financial risk to the lending party in case of delayed payment or nonpayment.

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Credit Analysis

Process of analyzing past payment behavior of payers based on their payment trend, i.e. speed of payment measured in average number of days compared against their most common invoice terms.

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DAYS BEYOND TERMS (DBT)

Industry term that indicates the number of days an invoice is past due on its terms.

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Declined Invoices

Status assigned to invoices that were not approved for payment as a result of any of the following: incomplete paperwork, creditworthiness concerns, payment issues or large customer concentration.

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Deposit Book

Paper book that allows clients to deposit invoices and keep a historical record of invoices deposited at IPS.

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Due Diligence

Process of verifying documents supporting an invoice and assessing potential credit risks involved in financing that invoice.

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eCard

Access card issued by IPS featuring clients and payers’ user names and passwords for secure access to the IPS Online Account Manager.

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eCheque

Electronic cheque based on pre-authorized debit (PAD) allowing payers to conveniently pay invoices through our SSL-secured system.

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Electronic Wire Transfer

One of the two methods for Electronic Funds Transfer (EFT) that allows a person or an institution to transfer funds electronically. Wire transfers cost more, but they are faster and more convenient than the other EFT method, Automated Clearing House (ACH).

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Face Amount or Face Value

Gross amount of an invoice accounting for the cost of goods or services, plus applicable sales taxes.

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Follow-Up

Process of verification of receipt and good standing of invoices after they have been financed by IPS and periodical follow-up for payment details based on the invoice terms initially set by IPS’ clients.

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Invoice

Legal debt instrument indicating an amount of money owed by a customer for purchased goods or received services. Generally, invoices may be traded or sold.

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Invoice Deposit Summary

An IPS document summarizing a single invoice or a collection of invoices processed at the same time. The IPS Invoice Deposit Summary includes all invoice-related transactions such as approved and declined invoices, net disbursements, applied rebates, chargebacks, bank charges and other transactions.

Also referred to as Schedule or Batch.

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Invoice Handling

Automated IPS process that generates digital images of invoices, and handles their delivery through regular mail or email.

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Invoice Processing

Systematic approach behind the IPS 8 hour promise involving all the steps from invoice deposit to invoice financing.

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Invoice Receivables

Financial assets reflecting a certain amount of money owed to a company for goods and services provided on credit.

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Invoice Receivable Aging

Classification process of due invoices based on terms of 30, 60, 90, or 90+ days used to analyze and follow-up on the amount of money owed to a business by its customers. Invoice Receivable Aging helps credit grantors predict the collection process, plan cash flow, and assess the collateral value of invoice receivables.

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INVOICE RECEIVABLE MANAGEMENT

Systematic approach for managing all administrative aspects of an invoice owed to a company, starting from the point of assignment to IPS to the final payment of the invoice receivable.

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IPS Payment Index

Average number days it takes a business to pay its suppliers. The Payment Index (PI) ranges between 0 and 99, with lower scores indicating prompt payments and higher scores indicating delayed payments.

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Liability

Financial obligation in the form of debt, claim or potential loss. Debt on terms of less than one year is usually considered a short-term liability, and debt on terms longer than one year is considered a long-term liability.

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Lien

Creditor’s claim against a property used to speed up debt payments. Courts can grant liens in order to satisfy judgments.

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Lien Search

Search through public records on file in government offices for any claims (pledges) against the property of a business (e.g. invoice receivables) or an individual (e.g. personal residential property).

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Liquidity

Accounting measure of the ability of a debtor to follow through on their financial obligations on time. Having good liquidity is an indicator of solid cash flow and a well-run business.

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Negative Cash Flow

A financial situation where income is less than expenses. Prolonged negative cash flow can lead to bankruptcy.

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Non-IPS Payment

Payment sent to IPS Invoice Payment System for invoices that were not assigned to IPS; the procedure is to re-route this payment to clients.

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Notice of Assignment (NOA)

Document that validates the transfer of ownership of an invoice from its original issuer to IPS Invoice Payment System and provides payment directions for the payer.

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Pending Invoice

Status assigned to invoices when one or a combination of any of the following occurs: incomplete paperwork, creditworthiness issues and payment issues from a common payer.

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Personal Guarantee

Agreement in which the principal of a corporation assumes personal liability for the financial obligations of the corporation.

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Proof of Delivery (POD)

Document that proves delivery of a shipment to its assigned destination.

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Purchase Order (PO)

Supplier contractual agreement requesting a product or service, and detailing description, cost, delivery and payment terms.

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Rebate

End-of-month disbursement going to clients as an unused portion of their initial deposit after invoice payment has been received from their customers.

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Reserve

Account established by IPS in order to track funds owed to a client as financed invoices are paid. The reserve equals to the total amount of invoice deposits minus advances, service fees, chargebacks and administrative charges applied during invoice cycles.

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Security

Property given or pledged as a guarantee for the repayment of a debt.

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Transaction Summary

IPS invoice cover that highlights key aspects of an invoice financed by IPS. The IPS Transaction Summary contains a payment stub to facilitate convenient payment.

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Uncertain Account Provision

Money set aside as a contingency to cover the negative financial impact of an uncollectible invoice.

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Verification

Process of initial verification of invoices to ensure their receipt and good standing after they have been financed by IPS Invoice Payment System.

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