This article describes a way you can show the purchasing of the debtors and payments in your company file.
This article is provided for guidance only, and might not be suitable for your busines...
Updated 6 years ago
Version 2.0
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There are many different ways to factor debts, and gets down to whether there is recourse or no-recourse factoring involved.
Most factoring is done with the recourse method employed.
Which means that the factoring company will advance you 80% of the invoice amount, with the other 20% payable after collection and after their fee, but if they don't get it then you owe them back the money they advanced on that invoice.
In that situation, you would never be clearing out the customer's invoice until such time as it is actually paid, and therefore you would be creating a liability(credit card account type) account for the 'advance' from the factoring Company.
Once the customer pays the invoice, this is where payment would be received against.
The factoring Company has a statement of your account that is available, which is reconciled, just like a bank account/credit card to know 'where you are at'.
Not all the fees charged by the factoring company will have GST and this will be ascertained from the tax invoice that they generally issue on a monthly basis.
Also, when the recourse method is involved, you will find that after a certain period, (usually 3 months), the factoring Company will pass the invoice back to you, if non payment has happened.