I am faced with the following situation and was wondering whether anybody is able to help:
1. A client invoices several different customers for the services they provide them as normal
2. The payment received by the client does not match exactly to the invoice amount - this is due to the way the payment schedule is agreed.
3. The above is done by a third party on behalf of the client who deduct their fee as well as withold the input VAT - which is transferred to the client when the VAT return is complete in order to allow a payment to be made to HMRC.
My concern is that the customer accounts on the system will always show as being outstanding for payments as the payments received are not matched off properly against customer invoices - therefore this will create a large debtor balance at year end which will be incorrect.
What is the best way to approach this.
-- Edited by NA_AA on Tuesday 24th of January 2012 09:17:35 PM
sorry I really am having trouble picturing the true difference on the accounts etc - if you want to email the question over with any figures Ill have a go at helping.
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Donna Curling - Complete Book-Keeping Ltd (CBKLtd) - 07939 101900
What you are describing sounds very much like your client is using a factoring company. If this is the case the way I do it is to set up the factor as a bank account and show their fees in a similar way to bank fees. The invoice less fees should should match the payments. The VAT is then just shown to be paid from the factor 'bank' account rather than a normal current account. Most factoring companies will also provide regular statement to allow ou to reconcile their account.
Agree with Kris - if it's a factoring account - set up as a separate bank account. Make sure that you allocate the correct (full) amount of the payment to the customers, not the discounted amount (unless of course, the customer really has underpaid). Watch out with the Factoring statements (if it is factoring) as most Factors produce two sets of statements, (a sales ledger statement and a "client funds" statement - so, ensure that you are reconciling to the correct figure for the overall liability to the Factors).
I did a series of blogs on factoring last year, and you might find the one on bookkeeping helpful. http://www.happyaccountant.com/2011/08/bookkeeping-for-factoring/
I do not have the full details as yet - this is the scenario presented to me, and I have to decide whether I want to take on this work as I am not familiar with work which involves factoring
I have had a few clients who used factoring. They all used Bibby. The range of reports were reasonable and could be downloaded from a client area of the website.
Yes, it's additional work. For a start, it's another bank account to reconcile and some extra data input. How much more complex depends on the Factor. Some Factors produce excellent reports, and make certain things easier (for example they some make it clear which invoices have been paid, without you having to trawl through remittances). Others have terrible reports (quite frankly) and create a lot of additional work.
Ask the client if you can see some reports, so that you can get an idea of the volume etc... and also if they can arrange for you to have online enquiry access to their Factoring account (otherwise you will spend a good deal of time "chasing" for the correct report).
Also, not all clients understand what their Factoring reports mean - so be prepared to go directly to the Factor in the event of a query (and make sure both client/Factor would be happy with this) - hopefully, once you're on top of it all, this will be a rare occurence.
