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Accounting for Invoice Financing

Accounting for Invoice Financing

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My client has started invoice financing with HSBC. I have researched AW, the web and Sage and have worked out what seems to be best practice accounting system, using a dummy bank account.

My problem is that HSBC do not seem to maintain records that they can report to us that mirror the dummy bank account method. Their ‘Current Account’ receives value from our client invoices as they are raised, in addition to what I see as valid dummy bank account entries. Thus we cannot balance to this account as it effectively represents not just the cash position with HSBC but the sales ledger value.

We seem to have two alternatives. To plough on with what I see and read as best practice, and by downloading, then amending transaction listings (ie getting rid of the sales invoices) from HSBC, performing a reconciliation to that.

Or alternatively, posting ‘payments’ of client invoices to the (what now won’t be) dummy bank account. Thus clearing the client sales ledger before the customer has actually paid. HSBC maintain a good sales ledger record, so I can see that we can use that for control purposes. But this is not a system that is recommended by anybody that I can find.

I’m sure this is straightforward when up and running, but I don’t want to set the client off on the wrong track if anyone can advise please?

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By petersaxton
12th Mar 2013 22:00

Not seen this before

Usually invoice financing firms keep two accounts. One is keeping track of the sales ledger they are dealing with and the other is keeping track of what the loan is to their client.

You seem to be saying that HSBC are not telling their client what they owe them.

You also seem to be saying that HSBC are not explain what they will allow as a maximum loan to the client.

I would speak to HSBC about this because it seems wrong.

 

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By Richiejjj
15th Mar 2013 00:23

Invoice factoring
There are two relevant accounts for you :

Your debtors - sales
Your liabilities - cash received against the sales

You know the cash you have received, you know the charges you pay for the facility.

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By agknight
15th Mar 2013 08:55

Thanks Peter

Yes I like the way you put it in second para 'HSBC not telling client what they owe them'.

We have spoken with a couple of nice people at HSBC but they do not profess accounting knowledge - this seems difficult to get hold of.

I am half expecting we will receive a statement through the post showing what we are looking for, but not received yet.

But at least confirmed we are on the right lines.

 

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