Updated 2026-05-19

Verification exception

A problem found during invoice verification that may delay or prevent funding.

Why it matters

A verification exception is raised when the factor cannot confirm that an invoice is valid, accepted, and undisputed through the normal verification process. Exceptions occur when customers are unreachable, when the customer disputes receiving the goods or services, or when the invoice amount does not match the customer record. An invoice with an open verification exception is typically held until the issue is resolved. Persistent exceptions from a specific customer can affect credit limit availability for that account debtor across all funded invoices.

How it appears in contracts

Factoring agreements define how verification exceptions are handled in the Verification or Eligible Receivables section. When an exception is raised, the seller is typically notified and given a defined period to resolve the discrepancy by providing documentation or obtaining customer confirmation. If the exception is not resolved within the specified window, the invoice may be held indefinitely, charged back under recourse provisions, or returned to the seller. Multiple unresolved exceptions can trigger an audit of the seller invoice submission practices under the audit rights provision.

Related terms

• Chargeback
• Notice of assignment
• UCC-1
• Lockbox