Borrowing base certificates: reconcile receivables before asking to draw

A borrowing base certificate shows how collateral supports availability under a particular credit facility. The accounting receivables balance may include invoices the lender will not advance against, or will advance against only in part. Prepare the certificate from reconciled records and the facility's eligibility rules before treating the resulting amount as available funding.

The OCC describes accounts receivable and inventory financing as lending supported by those working assets. Its asset-based lending handbook discusses eligibility, advance rates, collateral monitoring, and borrower reporting. Those materials explain the lending model. Your own agreement determines the eligible assets, exclusions, concentration limits, reserves, certificate format, and reporting frequency.

Start with an invoice-level aging for the correct entity and cutoff. Save the export before making exclusions. Include customer identity, invoice date, due date, original amount, open amount, currency, and credits. Tie the population to the general ledger and explain allowances or other differences. A report refreshed the following morning may contain receipts that were not part of the required reporting date.

Reconcile cash application as well as invoices. Unapplied receipts, unresolved credit notes, duplicate customers, and disputed balances can distort both aging and eligibility. Keep an exception schedule rather than manually changing invoice dates to improve the result. If a certificate must be filed before every accounting issue is resolved, obtain an approved treatment consistent with the agreement and retain the unresolved items for follow-up.

Build the eligibility calculation at invoice or customer level, as the rule requires. Potential exclusions can concern aging, customer concentration, related parties, disputes, geography, or other contractual conditions. These are questions to map from the agreement, not a standard list that applies to every facility. Preserve the reason, amount, and rule for each exclusion.

An invoice may fail several rules. Give each invoice a primary exclusion category and keep secondary flags for review, or use another method that proves exclusions are not added twice. Calculate customer concentration at the level required by the agreement; related customer records may need to be combined. Have the lender clarify how an ambiguous customer grouping or credit balance should be handled.

Assume a simplified facility has $1,000,000 of reconciled receivables. There are $150,000 of aged exclusions, $50,000 of related-party exclusions, and $100,000 of concentration exclusions. For this illustration, the groups do not overlap. Eligible receivables are $700,000. An assumed 80% advance rate produces $560,000 before an assumed $30,000 reserve, leaving a $530,000 borrowing base.

If the facility limit is $600,000 and $400,000 is already outstanding, the simple calculation leaves $130,000 of additional availability. Other usage, conditions, or reserves could reduce the actual amount. The 80% rate and every dollar figure here are hypothetical, not market terms or a lending offer.

Compare the current certificate with the previous one using a movement schedule. Separate new invoices, collections, credit notes, write-offs, currency changes, and changes in eligibility. A higher sales balance can coexist with lower availability when invoices age past a cutoff or one customer's share of receivables grows. That is a different problem from a reduction in the contractual facility limit.

Review subsequent collections as evidence for resolving records, while preserving the certificate's actual cutoff. Do not include cash and the invoice it settled in two places. Where cash is controlled by the lender or applied automatically against the facility, reconcile that mechanism with the loan statement and cash forecast so the same receipt does not fund two assumed payments.

If the revised borrowing base falls below outstanding usage, flag that result immediately for the finance lead. Check the agreement's reporting and remedy provisions with the appropriate adviser. A negative availability figure should remain visible in the forecast until the underlying position changes.

Retain the original aging, ledger reconciliation, eligibility calculations, reserve information, facility usage, review notes, signed certificate, and submission evidence together. Protect formulas and record any change to the rules. A replacement preparer should be able to trace the filed amount without relying on explanations stored in the previous preparer's inbox.

When hiring accounting support for this work, show the actual certificate and redacted loan clauses during scoping. Ask who owns customer-master cleanup, eligibility exceptions, lender questions, and review before signature. A bookkeeper may supply the underlying reconciliations while a controller or other qualified adviser reviews the contractual calculation. Name that handoff before the next draw request depends on it.