Factoring

vic
vic Registered Posts: 4 New contributor 🐸
in General accounting discussion
Hi I hope someone can help, I've not posted on here before but I am having a complete mental block on dealing with sales invoices being factored out.
Do I set up a seperate factoring account for these invoices or a nominal code for factoring? Please help

Comments

  • groundy
    groundy Registered Posts: 495 Dedicated contributor 🦉
    You need to set up a factoring bank account. Sales Invoices will go to sales ledger as normal. Sales Receipts will go through the factoring bank against sales invoices. Charges are then posted as payments in the factoring account and money drawn down is shown as a transfer from the factoring account to bank current account.

    You should then reconcile the factoring account against monthly statements from factoring company.
  • vic
    vic Registered Posts: 4 New contributor 🐸
    Many thanks for that it now makes perfect sense !!
  • claudialowe
    claudialowe Registered Posts: 275 Dedicated contributor 🦉
    BEWARE of factoring companies.

    The only two bad debts I have ever, ever had were from clients who factored their invoices - and went bust.

    The factoring company charges a fortune, and only too quick to pull the plug when things are bad. Also, their agreements are tighter than the proverbial, and almost impossible to get out of.

    Claudia

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