Reverse Factoring
Short definition
Reverse factoring is early payment by a bank to a supplier on an invoice the buyer has approved. The buyer may extend DPO; the supplier collects cheaper off the buyer’s credit.
Detailed explanation
The programme sits with the buyer’s bank. The supplier is paid at a discount; the buyer pays the bank on the (often extended) contractual date. The accounting question is whether trade payables have become financial debt; extension and practical control drive that classification.
Concentration and a sudden programme shut-off cut DPO and supplier liquidity together. That is a hidden maturity wall.
Why it matters for the CFO
It creates cash by cutting OWC without touching EBITDA. If classification flips to financial debt, net debt and covenants gap at once. Supply-chain risk is now bank appetite.
How to read it
If the programme balance sits in trade payables, DPO stretches. Reclassification cuts DPO and raises gross debt — cash is unchanged, ratios move.
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Definitions are educational. They are not investment, credit or tax advice.