Factoring Company

Does anyone on here have experience of factoring companies?, it is just that I have a client who uses a factoring company and when the factoring company sends through remittances, they have a lower amount as the invoice value then what the original invoice has on it. My question is, would I be correct by putting through the original amount on the invoice and putting vat through as that amount.
Also I have a balance left over from the difference from the original amounts to the amount the factoring company has put the invoice on as.
Thank you in advance if you can help.
Also I have a balance left over from the difference from the original amounts to the amount the factoring company has put the invoice on as.
Thank you in advance if you can help.
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In my experience, the gross value of the invoice is as it is.
If the factoring company pay less, they may be deducting their fees at source per invoice.
This would make it just like a paypal account.
Alternatively, some companies will send through 70% straight away, the balance when the customer pays, and then deduct their fees from the 'holding account' and send an invoice.
If they are cash accounting for VAT then you declare the VAT on the amount the customer pays, not the amount released by the factors.
Quite frankly, they are a pain in the arse and I don't think the cashflow advantage is worth it, all things considered.
Sorry Lorraine, without seeing the paperwork I haven't a clue! I only worked on one factoring job and they didn't do it like that so I'm really not sure.
I can't see how it would reduce it thought - your gross sales are your gross sales, if you get paid less then there is an expense to balance it out.
CR Sales £1000
DR Bank £900
DR Expense £100
I think commissions are VATable (standard) so they should be providing VAT invoices.
If it was me I would call them direct and make them explain themselves, I'm sure they get this a lot!!
I have had a small experience with this and it can be a bit trikky.
I use Sage and the client invoiced their customer gross and this would be posted to the sales ledger. the client would then send a copy of the invoice to the Factoring company for an 80% payment against the debt.
I set up a separate bank account for the factoring company to process transactions through.
When the 80% was received I would pay off the full 100% amount of the factored invoice on the sales ledger as being paid into the factoring bank account and then transfer the 80% from the factoring bank account to the bank account matching the 80% received.
Leaving the 20% on the Factoring bank account as a debtor. I would leave this there until the actual monthly statement came through from the factoring bank that would show, any commission and VAT to be accounted for in the 20%, since some of the difference was exempt and some standard rated.
The statement had narrative to show what was what and also had sufficient narrative to act as the invoice to enable claiming of any input VAT, I would then post payments matching the 20% to enable the factoring account to be reconciled to nil.
Hope this helps