Accounting for Factored Invoices - UK Business Forums

It depends to some extent on how closely you want to track your invoices and accounts receiveable within Freeagent. In other words, do you want to enter all of your invoices into the system and track individual customer payments so that you know how much each owes?

Or are you content to simply enter totals into Freeagent and rely on the factor for detailed listings?

Going the first route

1 Set up a new bank account called Factoring Account. This will track money paid to the factors from customers and money transferred to you.

2 Raise your sales invoice in the normal way, as if you were sending it direct to the customer - you may actually do that.

3 The initial payout that you receive is booked as a transfer from the factoring account to your local current account. In fact this applies for all payments from the factor to your bank.

4 When the customer pays, or part pays, credit the invoice and bank the money in the factoring account (reflecting the fact that the factoring company received the cash.

5 Factor fees and interst are shown as payments from the factor account to the relevant expense.

That's basically it. You should be able to use the monthly reports from the factors to check your sales ledger balances and the factoring account balance. In fact, depending on the company, making sense of the statements might be the biggest challenge!

Source: http://www.ukbusinessforums.co.uk/forums/showthread.php?t=289833

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