I am so glad I found this forum! I recently started working for a clothing wholesaler who works with a factor company. They have sold the debt with the right to recourse. I have never worked with factoring before so I'm trying to learn all I can on to how to account for the transactions in QuickBooks.
Side note, the company has not been using a factor for long and my predecessor didn't understand factoring (along with some other basic bookkeeping practices which has made a nightmare for me to clean up...) so I do not have a way to reference what has been done in the past.
I'm finding some information on this forum for how to handle the customer invoices. I'm still a little confused about whether I should set it up an additional bank account or not. In the mechanics of how it works, this seems like the best way to account for the transactions. However, I do not want to create a problem making it look like it is an asset when it is really a contra asset. Some advice on this would be greatly appreciated.
The second piece I am learning about is we have a vendor who uses the same factoring company as us so we have a second factoring account set up for transactions with them. I need to do a little more research with the factor company to find out about the fees but I'm hoping someone here can help explain how to post the transactions. As anyone worked with this situation before?
Thank you in advance for any help you can provide!
Set up the factoring company as a Bank account. Post any direct payment to them via this bank account, and key the factoring charges etc that appear on their reports to this account too, just as would a normal bank account. You should get a transaction report that looks very much like a statement. Care re vat on some of the charges. Anyone that pays the company by mistake, key direct to clear their accounts from your normal Bank and then when you send the funds on to the factor, just key it as a transfer between the two 'bank accounts'.
You will have all sorts of reports available from the factoring company to aid your reconciliations. Looks complex when you first start, but will be ok once you get going.
Hope that helps.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
