Receivable Purchase Agreement

A receivable purchase agreement is a contract between a seller and a financial institution that allows the seller to sell unpaid invoices from buyers to the financial institution.

This means that the seller can enable cash flow until payment is received from the buyer.

Data Model

In the SAP Financial Services Data Management data model, you can represent the following categories of receivable purchase agreement:

  • Factoring Agreement

    The seller sells the invoices to the financial institution in return for a short-term loan that is a percentage of the invoice value. The financial institution also takes over the credit control. Once the buyer has paid the invoice, the financial institution pays the seller the remaining balance minus their fee. The buyer is aware of this process and the financial institution is responsible for chasing up unpaid invoices. The buyer pays the invoice amount to the financial institution.

    There are different types of factoring that you can represent in the data model using the Factoring Agreement Type attribute, for example:

    • Full Factoring

      The financial institution provides all the services like finance, collection of arrangement, sales ledger administration, credit protection.

    • Maturity Factoring

      Services such as collection of arrangement, sales ledger administration, and credit protection are provided but the finance is not provided.

    • Agency Factoring

      Finance is provided but without services such as collection of arrangement or sales ledger administration.

  • Invoice Discounting Agreement

    The seller sells outstanding invoices to the financial institution in return for a short-term loan that is a percentage of the invoice value. Once the buyer has paid the invoice, the financial institution pays the seller the remaining balance minus their fee. The buyer is not aware of this process and the seller is responsible for chasing up unpaid invoices. The buyer pays the invoice amount to the seller.

The following is an example of how a receivable purchase agreement can be represented in the data model:

It is also possible to specify whether a factoring agreement or an invoice discounting agreement is with recourse, and the extent to which this is the case. This specifies whether the financial institution relies on the seller for any shortfall in the event of non-payment by the buyer. If you specify that the agreement is without recourse, the financial institution relieves the seller of any further liability for the debt and accepts the entire credit risk of non-payment.

The data model also contains the following important entities to enable you to represent the processes related to receivable purchase agreements:

  • Settlement

    This entity enables you to represent settlements with regard to the receivable purchase agreements, whereby the financial institution pays the seller and receives payments from the buyer.

  • Trade Finance Communication Event

    This entity enables you to specify the events that are related to the receivable purchase agreement such as presentation or claims.

  • Agreed Limit

    This entity enables you to represent the limit that has been agreed upon between the financial institution and the seller. This is the maximum amount that the financial institution advances to the seller.

  • Fee

    This entity enables you to represent the fees or commission charged for the receivable purchase agreement.

  • Interest

    This entity enables you to represent the interest due, which can be collected in advance when the invoice is purchased or afterwards on a monthly basis.

  • Settlement Account Assignment

    This entity enables you to represent the account that is assigned the receivable purchase agreement. This account is used for settlement to or from the financial institution or external accounts.

More Information

For more information, see the related entities and their definitions in the data model represented in SAP PowerDesigner.