A credit memo is document given to the factoring company (and client) by an account debtor outlining credits against an invoice. In short it is a formal explanation of why an invoice is not being paid in full. Credit memos can arise from a variety of situations where goods are damaged, not received or incorrect in some fashion. A factoring company is watchful of credit memos because they represent a non payment on an invoice. Frequent credit memos can indicate a client’s in ability to properly invoice or deliver quality goods all of which increase the factor’s risk.
