What Is Notice of Assignment?


Invoice factoring is a growing trend amongst small and mid-sized businesses, set to grow by 8% each year. Factoring provides tremendous benefits to small businesses looking to increase cash flow and pay employees/bills on time. Notice of assignment is a critical feature in factoring, as it alerts both the business and the customer that the invoice has changed hands. Below is an in-depth look at notice of assignment to better educate you on the subject.

 If you are looking for a reliable and trusted factoring company, don’t hesitate to contact Outsource Financial Services today. We have 20+ years of experience helping small businesses in the trucking industry. 

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Notice of Assignment and Invoice Factoring

A Notice of Assignment lets customers know that the financing company or bank is now responsible for payments and is in charge of accounts receivable. The letter contains legal language outlining the terms of the invoice(s) and to who the payment is to be directed. It also includes instructions informing the customer that any payments made to you or other parties do not count as invoice payments.

The notice of assignment is the first step in establishing the relationship between debtors and the factoring provider. Your customers need this notice to be aware of any changes to their payment structure. 

Why Factoring Companies Use a Notice of Assignment When Funding Invoices

Factoring companies issue these notices for important reasons. The first is to inform them that their balance has changed from your business to the factoring company. Second, it creates the legal frameworks necessary for pursuing the debt they are owed. The notice will also contain pertinent information regarding future payments. Bank information and payment instructions are included. Finally, NOAs are issued to comply with any local and federal laws. 

Why Your Customers Must Know You Are Factoring Their Invoices

Keeping your customers in the loop about invoice factoring is essential. It’s best to inform them that an NOA from the factoring company is on its way. This lets them know what to expect ahead of time. It’s also important to let them know so they don’t attempt to pay you for the outstanding invoice. Once the factoring company has taken over the debt, all payments should go to them. Finally, it lets them know who to contact going forward, helping them establish a working relationship with the creditor and preventing improper payments and other issues. 

What Happens If You Receive a Payment Intended for Your Factoring Company

The notice of assignment informs your customers that the factoring company is now the party to be paid for outstanding invoices. Unfortunately, mistakes do happen from time to time. So what do you do if your client pays you instead of the factoring company?

Contact Your Client

The first step is to contact your client and let them know about the mistake. Odds are they forgot to adjust their accounts payable to reflect the change in recipient. Let them know the factoring company is the one they need to pay, not you. 

Void the Payment

Suppose your client attempted to pay you via a check, void or shred the check and inform your customer to make the payment to the factoring company. If they paid you electronically, you’d need to return the funds to them so they can redirect them to the factoring company. Remember, it’s their responsibility to pay, not yours. 

Contact Your Factoring Company

If you’re unsure of what to do, you can reach out to the client and the factoring company. A reputable factoring company, such as Outsource Financial Services, will offer you customer service to help you rectify any issues you encounter. 

Why Factoring Benefits Customers

A common question about notice of assignment and invoice factoring entails customer benefits. Knowing how factoring benefits you is essential, as customers gain significant benefits from partnering with a factoring company. 

Favorable Payment Terms

Many companies prefer having net 30, 60, or 90-day invoices. Small businesses often can’t maintain proper cash flow with these rates and would be excluded from operating with companies that use these terms. You can get your cash when you need it and cater to customers who want standard invoice deadlines with invoice factoring. 

Improves Your Ability to Serve Them

Managing your finances while simultaneously delivering your services can be quite a headache! Factoring enables you to focus on the things your customers want most while ensuring you still get paid. 

Paperwork Reduction

Finances and lines of credit involve tons of paperwork. On the other hand, factoring requires very little paperwork. This benefits both you and your customers, as there’s less to comb through and fewer chances to miss something important.

No Threat of Harassment

Reputable factoring companies do not harass your customers. Beyond the notice of assignment, your customers’ only interactions are invoices and late payment notices. On the off-chance your clients skip the bill, the factoring company will use proper legal means for repayment. 


We hope the article above helps you better understand the nuances of the role of notice of assignment in invoice factoring. At Outsource Financial Services, we take the pain out of factoring. Whether you’re a small or large business, we can help you manage your invoices and improve your cash flow. If you have any questions about notice of assignment, invoice factoring, or our services, please contact us today. We’d be glad to discuss any questions you might have. 


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