Invoice Reconciliation Steps with Invoice Factoring Bookkeeping
- Invoice Reconciliation Steps with Invoice Factoring Bookkeeping
- Accounts Receivable Factoring Accounting
- How to Record Factoring Transactions in Quickbooks & Sage
- Step 1- Initial Funding by Bankers Factoring
- Step 2- Receipt of Customer Payment to Bankers Factoring
- Step 3- Partial Payment of Invoice(s) by Customer
- Ready for the owner-employees of Bankers Factoring to fund your entrepreneurial dreams? Call 866-598-4295 or go to Bankers-Factoring-Application.
Accounts Receivable Factoring Accounting
How to Record Factoring Transactions in Quickbooks & Sage
The following example will provide a way to record journal entries for factored receivables with Bankers Factoring. Remember that your journal entries should be booked only once per day on a daily summary basis. You should use daily funding reports from Bankers Factoring as the source document for these journal entries. But make sure you double-check your journal entries by auditing the factoring purchase and factoring fee report(s) you downloaded from Bankers Factoring.
Four general ledger accounts need to be created and added to your chart of accounts to account for your factoring relationship with Bankers Factoring:
FIS – Factored Invoices Sold: a contra asset account
FIR – Factored Invoice Reserve: an asset account
FFE – Factored Fees Expense: an expense account
WFE – Wire Fees Expense: an expense account (or use your existing Bank Charges account)
Step 1- Initial Funding by Bankers Factoring
To account for the initial funding (when Bankers Factoring selects the invoices from the Schedule to advance funds), make the following entry:
Assuming a $100,000 receivable with an 80% advance rate:
Step 2- Receipt of Customer Payment to Bankers Factoring
And now you wait for your customer’s payment. Once they pay your factoring company (Bankers Factoring), your earned reserve is due from the factor, so you can get additional cash flow from that last 20% or $20,000 (minus the factoring fees) referenced in your factoring agreement.
Accounting for customer payments will require using your Collections Report, which you can download daily. Once Bankers receives payment, you identify each invoice, and the net earned reserve (the extra $20,000 minus the factoring fee charged) or outstanding balance is remitted by Bankers Factoring, apply the payment to the invoice in the accounts receivable journal by debiting the FIS account.
Assuming a $100,000 payment in full by the customer:
In booking the journal entries in this manner, your cash balance will increase by $98,430 at the end of the transaction cycle. And the other $1,570 will show up as factoring fees & wire expenses on the P&L statement. Upon full payment, “zero out” both the A/R (asset account) and the FIS (contra asset account).
Step 3- Partial Payment of Invoice(s) by Customer
If your customer short pays or takes a discount, then only apply the amount paid to the invoice in the journal in the manner above. We hope this helps you reconcile your invoice factoring funding schedules with your accounting system. If you are using Quickbooks online we are happy to take a look. Please call Bankers Factoring with any questions about how you account for factoring accounts receivable.