Hi,
Please can somebody guide me with the following factoring issue.
1. Note that customer invoices have been loaded into Sage following the normal process
2. However, the outstanding debt from the above customers has now been sold off to a third party debt collecting agency
Please can you guide me with how to account for the factoring issue in Sage so that:
- the customer accounts are no longer showing an outstanding debt
- how to account for the admin charge bu the factoring company
- how is the bank affected?
Your help will be much appreciated
KR
Replies (9)
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Create a new 'sage' bank account.
I would suggest you create a new 'Sage' bank account.
Post a customer receipt to this internal account, for the full value of the customer invoice.
Post a bank transfer between the internal account and your normal current account for the amount of funds received.
Post a bank payment, from your internal account, to factoring charges for the difference.
Note that, in normal factoring, you would not normally show the individual invoices as paid off just because factoring funds have been advanced against them - but I guess from your question these particular debts have truly been sold, rather than just advanced against.
That seems fine.
You have said that you are going to post a journal to clear the customer balance. I think you should use the transaction type of customer receipt - hence the reason for using a 'bank' account so that you have the option of that type of transaction.
You could manage the same routine via credit notes directly to nominal accounts, but that would involve more transaction entries.
All seems overly complicated to me. If you know that the cash received equated to 90% of the debtor balance then allocate the cash received to the invoice in the usual way. You can then clear the balance (i.e. the factoring fee) either by using the discount funtion when allocating cash in the bank module or by raising credit notes to clear the outstanding balance - simply change the default nominal to the factoring charge nominal.
Agree with Tom
Makes reconciling to the factoring statement at the month end very straight forward
Year End
@nadia_a
The balance should be shown in creditors <1 year, it would be accurate to disclose it separately in the notes as 'factoring account'. This balance should be reconciled to the factoring company's statement.
Now hang on
Is this a normal factoring arrangement? If so the debt remains on your books and you borrow money against it using a dummy bank overdraft as discussed above.
Or is it a totally dead debtor where you have handed over all rights to a collection agency in return for a fixed fee. In which case what you get from the debt collector goes against the invoice and you write the balance off.