Just wondering how best to reflect the process of receivables being paid by factoring company (less their % and less bank charge). It has been suggested to set the factoring co. up as a bank account and when the customer pays the factor off, then credit the invoice otherwise it just sits in as a bank transfer (cr factor account, dr bank) Is this the best way to do it if the factor have bought the debt - effectively they have paid the receivable balance on that invoice or is it not that final?
in the case where it is a final purchase and can hit the receivables etc: (possibly) wouldn't it just be dr bank factor receipt, dr bank charge, dr factor cost/expense, cr rec'bl invoice total?
if it's not the case, can you tell me the best way to handle these transactions please.
I did put this question in the bookkeeping software etc forum threads but got no answer so I thought perhaps that was my hint to put it in a more appropriate place on the forum so I am hoping someone can help me.
Just wondering how best to reflect the process of receivables being paid by factoring company (less their % and less bank charge). It has been suggested to set the factoring co. up as a bank account and when the customer pays the factor off, then credit the invoice otherwise it just sits in as a bank transfer (cr factor account, dr bank) Is this the best way to do it if the factor have bought the debt - effectively they have paid the receivable balance on that invoice or is it not that final?
in the case where it is a final purchase and can hit the receivables etc: (possibly) wouldn't it just be dr bank factor receipt, dr bank charge, dr factor cost/expense, cr rec'bl invoice total?
if its not the case, can you tell me the best way to handle these transactions please.
i.e. has the debt been sold or is it a loan secured on a debt?
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
While it warrants more indepth investigation, I think the debts have been sold on. I would need to check the terms and conditions that were signed up for for myself but this is the impression I have got.
I have a client who uses factoring - but the debts remain his. In this case, the factoring account is basically a loan account with massive charges!
The factoring company (FC) transfers money into his bank, but this is just movement of money.
The FC do a "cash paid" report analysing what they have taken in from debtors within the month. I have debtor accounts for each customer, and I post each "cash paid" amount, individually, through a bank account on Sage, that I have set up as "FC bank account" - using customer receipt. This picks up the VAT, on a cash basis, at the correct date.
I then post factoring charges as a bank payment, and reconcile that FC bank account to agree to the monthly statement that the FC provides
I think if the debts are sold on, you would clear the debts as money came in from the FC. I would have assumed that you would have one customer account and that is for the factoring company. You would have a sales invoice and perhaps a credit note - the latter accounting for the reduction in sales when passing the debt (posted to charges expense account?). I cant be certain of this, as I have never had to do it, so welcome any further comments.
