Background

Factoring Accounts Receivable is a loan on your Accounts Receivable. A company loans money to you on specific invoices that you are borrowing against. If the company that you sold the goods or services to doesn’t pay you will have to repay the money. When money is borrowed it is less than the amount due on the invoice because of interest charge. 

Example

• You sell $1000.00 of services to ABC Company.
• You borrow money from XYZ Company on that invoice.
• XYZ Company sends or deposits $900.00 in your checkbook.
• This is the following journal entry:
• * Debit: Cash 900.00
• * Debit: Interest expense 100.00
• * Credit: Loans Payable 1000.00

AccountEdge Account Setup

1. Create new Loan Payable Account
2. Make that account a Detailed Credit Card Account Postable (This makes the account accessible on the customer payment screen)

Accountedge Screens & Entries (when you decide to factor)

• Journal entry screen:
  • Debit: Cash 900.00
  • Debit: Interest expense 100.00
  • Cash: Loans Payable 1000.00
• Receive Money screen:
  • Select the bank account & input $900.00 in the amount field
  • Allocation Accounts
    • Loans Payable 1000.00
    • Interest Expense -100.00
• When Customer pays the factor – Customer Payment Screen
  1. Select Loan Account as the bank
  2. Select the Customer who paid the factor
  3. Enter the amount received
  4. Apply it to the invoice or invoices

Notes

Setting it up this way doesn’t affect customer sales history or customer activity.