Hi, We use Factoring for a couple of our Client invoices. I would be grateful if someone could advise: How to record payments against Client invoiceHow to record advance payments to us from the factoring companyHow to record fees charged by the finance companyThere is very little clear walkthroughs online and QBO techies cant seem to assist! Thanks,

We have discussed this in the past - so a deep search will show lots of info. There is more than 1 way to account for AR factoring and arrangements with the funders may vary. I have done it this way:Establish a "FactorBank" account in QB.ALL the cash flow transactions between your company's 'normal bank account' and Factor get posted to that 'FactorBank" account.All the Factored Customer Payments are also posted as deposited to the FactorBank. Review the Factors statement to find these.When you get statements from the Factor record all the commission/discount charges as a "Vendor Bill" from the factor. Then pay that bill from the "FactorBank" account.Doing it this way uses a minimum of steps and is pretty clean - except that the FactorBank balance will normally be negative because you will actually owe them money. This is just a presentation problem - the underlying accounting is still correct.

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Question

Invoice Factoring

Forum|Forum|6 years ago
October 21, 2019
1 reply
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Hi,

We use Factoring for a couple of our Client invoices.

I would be grateful if someone could advise:

How to record payments against Client invoice
How to record advance payments to us from the factoring company
How to record fees charged by the finance company

There is very little clear walkthroughs online and QBO techies cant seem to assist!

Thanks,

QuickBooks Online Accountant

Anonymous

We have discussed this in the past - so a deep search will show lots of info. There is more than 1 way to account for AR factoring and arrangements with the funders may vary. I have done it this way:

Establish a "FactorBank" account in QB.
ALL the cash flow transactions between your company's 'normal bank account' and Factor get posted to that 'FactorBank" account.
All the Factored Customer Payments are also posted as deposited to the FactorBank. Review the Factors statement to find these.
When you get statements from the Factor record all the commission/discount charges as a "Vendor Bill" from the factor. Then pay that bill from the "FactorBank" account.

Doing it this way uses a minimum of steps and is pretty clean - except that the FactorBank balance will normally be negative because you will actually owe them money. This is just a presentation problem - the underlying accounting is still correct.

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