Factored Invoices - The Book-keepers Forum (UK)

lor · Guru

Factored Invoices

Denise · Senior Member

Hi Lor,

This is something I would like to know too, but if I am reading your post right you are saying you are posting 80% of the factor payment to customer account and 20% later, but the customer has not paid yet so I think I would set up a bank account for the factor company and do a transfer from that to your bank account and then when the customer actually pays the factor company do a customer receipt to the factor bank account. I think that might work. But as to why you have some balances left I don't know.

-- Edited by Denise on Friday 18th of June 2010 07:33:23 PM

lor · Guru

I am unsure about the balances left over, only on some invoices though, seems odd!

lor · Guru

I need to know how to treat the balances that are left over.

kjmcculloch · Guru

Hi Lorraine,

Have you worked out where the balance is coming from. Obviously 80% + 20% is 100% so there should be no balance. It's difficult to advise what to do with it when we dont know where it is coming from.

Kris

Denise · Senior Member

Hi Lor,

Does your client not get a regular list of customer payments received and the invoices they have been allocated to from the factoring company? This might show where the payment shortages are.

Just had a thought, if the final 20% he receives has had some fees deducted there would not be enough to pay all the invoices, this is why I think it would be better to allocate full payment when the customer actually pays.

Good luck

-- Edited by Denise on Sunday 20th of June 2010 08:42:38 PM

lor · Guru

Thank you for your replies, what is happening is that I am posting the whole invoice amount to the sales ledger then when the factoring company pays the 80% I am allocated that amount and once the cfactoring company pays the 20% I am allocated this also. But some invoices have a balance left over.

The factoring company sends my client a list of the invoices that they are sending payment for and send by bacs direct to my clients bank ac, so this is when I am allocating the payment from the factoring company. Also there are fees from the factoring company, these are invoices separately and are deducted from the total amount to be sent from the factoring comapny if this makes sense.

I can't for the life of me work out what the difference is!.

RobH · Expert

Hi Lor,

Does the factoring company supply a statement from which you can reconcile the accounts? also there are possibly two charge, the factoring fee and interest. It may be interest deducted if they haven't been able to collect the oayment from the customer within term they will charge this perhaps? I've not dealt with factoring comapnies so it's a bit of a guess!

Rob

lor · Guru

Hi Rob,

I think I will need to get a statement of account before I am able to know what this is, thank you for your suggestion. Hopefully this will reolve this situation.

lor · Guru

This is my first client who uses a factoring company! a bit of a learning curve for me, surely it can't be that difficult, once I know what it is! Like everything though!

additionsbookkeeping · Veteran Member

We factor our invoices. Which bank is it, you shouldn't need to allocate the money in the split its factored in.

You draw off 80% of the amount of the invoice the day its raised, or you can do. Then when the client pays if they pay on time you get the remaining 20%. If they pay late that goes to the bank instead.

So what you should see is the client paying the 100% of the invoice so you won't have any balances outstanding.

The transfers between the factoring company and yourselves take place between 2 bank accounts, usually called a Trust account and your current account.

Hope that helps give me a shout if I can help you any more with it.

additionsbookkeeping · Veteran Member

The factoring fees are shown as a payment out of the factoring bank account in your software at the end of each month, you need to do this to reconcile it.

kjmcculloch · Guru

The factoring company (bibby) that one of my clients use, charge fees, then later the VAT on they fees. This confused me to begin with.

lor · Guru

what I don't understand is that the factoring company has listed the invoices as a lower amount on the remittance.

lor · Guru

I can see that the client passes the invoices to the factoring company, they then list the invoice total lower, than the actual invoice total. Then from this amount the 80% and the 20% are correct and tie up perfectly, just can't get my head round why the factoring company put it through at a lower amount.

Another question of mine is that when I am given the original invoice from my client and it has more than what the factoring company put them through as mentioned above. Is it correct to put the invoice on the vat return with the original amount or should I be putting through as per the factoring company amounts?.

Obviously this is where the difference has arisen, it is the difference between the actual invoice raised and the amount of the invoice put through by the factoring company, does this difference get put through the accounts as an expense and also do I need to include a vat element? as the factoring comapany is vat registered.

Sorry a lot of questions, my head is doing a lot of thinking, I am also thinking why didn't the factoring company put down these extras costs on invoice so that I could see clearly what they are, a bit annoying.

Look forward to your responses....

-- Edited by lor on Monday 21st of June 2010 07:02:25 PM

lor · Guru

Should I be posting the amounts per the original invoice or should I post the amounts per factoring company which is a reduced amount?

kjmcculloch · Guru

Personally, I would post as the original amount and put the difference in as the factoring companies fee.

Susie Sue · Senior Member

Me too - as per Kris above.

lor · Guru

Okay, thank you for your help, I think I will still call the factoring company to clarify exactly what it is.

lor · Guru

typical, I am working today in my employed job and have bought in the wrong piece of paper, hence haven't got the no to phone.

If the case is that it is the factoring companies cut, then does this mean the clint would be able to claim back the vat element of the expense as both my client and the factoring company are vat registered.

And am I correct that the correct posting for this in sage would be dr expense: 7*** and dr VAT a/c then credit sales ledger account?.

Thank you for all your help in this matter.

Susie Sue · Senior Member

You should get statements from the factoring company showing fees, charges, vat etc smile

lor · Guru

Ok thank you

lor · Guru

I have had statements and remittances so far but it doesn't state what this is for, exept it does shoe the amount that they have reduced the invoice by, so this would be the figure to use.

I think it is clicking in to, I will have a quick chat with the factoring company when I find the no. just to be 100% sure.

-- Edited by lor on Wednesday 23rd of June 2010 12:54:41 PM

lor · Guru

The difference is the discounted value!

lor · Guru

Ok, now I know the difference is the discounted part, where the factoring company has taken a cut. Does this mean that the client can claim the vat element of this as both parties are vat registered?????

semsley · Guru

Depends on whether or not you have a VAT invoice from the factoring company.

lor · Guru

thank you for your reply, what is recieved from the factoring comp is a remittance statement showing the amount of vat and net amount of the invoice at the discounted rate, then the reminder is the part that is discounted, not a vat invoice as such, but when my client receives the invoice for the fees this is a proper vat invoice which is separate to the remittance statement, if you see what I mean.

Do you think this would suffice claiming the vat back?.

lor · Guru

right, I have sorted this now, the client had been giving me the incorrect invoices from the beginning, which I discovered after speaking with the factoring comp, who told me that I needed to use the invoice that listed the individual invoices and also the vat element, these are the ones to go by, so I have gone back to the incorrect posts and have worked out the amount that has been overpaid in vat and the overcast amount of sales and have adjusted the accounts accordingly, the amount isn't exactly material so therefore I have decided that an adjustment to just this years accounts would suffice.

I am relieved that this is sorted and have learned also a bit more about factoring accounts!

Thank you all for your help as alway!