This guide covers the factoring invoicing process from both the accounts receivable and bookkeeping perspectives. It provides step-by-step instructions and a list of necessary bookkeeping accounts.

Using factoring invoicing often keeps accountants in companies and accounting offices busy. In the following example, the factoring invoicing process is described from both the accounts receivable and bookkeeping perspectives according to the procedures described below. A table-form material of bookkeeping vouchers and entries has been compiled. Note: this is one way to handle factoring invoicing.

Factoring invoicing processing process in the example:

  • The finance company is one of the finance companies supported by Netvisor regarding factoring invoicing.
  • The finance company pays a lump-sum payment for the invoices transferred to factoring to the company’s bank account without a reference and deducts its own fee directly from the payments. A breakdown of financed customers and invoices as well as the fees charged by the finance company can be obtained from the finance company or their online service.
  • The lump sum is recorded from the bank statement to an intermediary account established for processing factoring payments. It is advisable to create a posting rule on the bank statement for recording lump-sum payments.
  • The processing of payments to sales invoices is done using the Mass Payment Entry function, utilizing the intermediary account established for processing factoring payments.
  • The fee charged by the finance company from the lump-sum payment is recorded with a separate voucher according to the breakdown provided by the finance company.
  • The balance of the intermediary account established for processing factoring payments is monitored using open transactions and allocating transactions. The lump-sum payment is linked to the payments of the sales invoices and the voucher, and the fee charged by the finance company has been recorded. The total sum of these transactions must be zero.

Factoring implementation in my example case

You can open the instructions for implementing factoring by selecting Accounting > Sales > Basic data and settings > Factoring account management.

  1. Establish a factoring account in Netvisor according to the instructions. In the example, the factoring account has been established as follows:

  2. Establish in the specification of accounts an intermediary account for processing factoring payments and enable allocating transactions for the account. In the example, the intermediary account has been established as follows:

  3. Establish a new payment method for mass payment entry.
    • Select Accounting > Sales > Basic data and settings > Payment methods.
    • Establish the payment method that you will use in the Factoring payment entry for the invoice function.

Factoring invoice creation and payment entry, example case

You can handle factoring invoicing on sales invoices by selecting Sales > Sales invoices.

  1. Establish a customer.
    • Open the customer card.
    • Select the Additional information editing tab.
    • Define the Factoring account on the customer card.
  2. Create invoices and send them.
    • Create the sales invoices as usual.
    • Send the invoices. The sending process automatically includes both the factoring notification and the sales invoice to be sent.
    • Vouchers are created from the sent invoices. In the example, the content of the vouchers is as follows:

  3. Process the lump-sum payment from the finance company on the bank statement.
    • The finance company pays a lump-sum payment for the invoices transferred to factoring to the company’s bank account.
    • Select the Bank statement view.
    • Post the lump-sum payment to account 1717 Intermediary account for processing factoring payments.
    • Create a rule on the bank statement for the posting rule, where the posting is defined to account 1717.
    • In the example, the voucher looks like this:

  4. Record the payments to open sales invoices with the mass function according to the breakdown from the finance company.
    • Open the sales invoice list.
    • Search for open sales invoices.
    • Select the invoices included in the finance company’s breakdown.
    • At the bottom of the list, select Invoice actions.
    • Select Record as paid.

  5. Enter the correct details for the payment in the mass entry.
    • Enter as the Payment date the same day on which the lump-sum payment was received in the bank account.
    • Select as Bank account/payment method Factoring payment entry for the invoice.
    • Approve the mass entry.
    • After this function, the sales invoices are in paid status.
    • MS vouchers are simultaneously created in bookkeeping.
  6. Record the costs charged by the finance company with a separate voucher.
    • Use the breakdown provided by the finance company.
    • Create in bookkeeping a separate voucher for the costs charged by the finance company.
    • In the example, the voucher looks like this:

  7. Finalise the balance sheet specification for account 1717 Factoring sales receivables in transit.
    • Open account-specific entries for account 1717.
    • Link all entries belonging to the settlement in question together with allocating transactions.
    • Start the linking from the bank statement entry.
    • Press the second arrow of allocating transactions on the bank statement entry row.

  8. Select and allocate the transactions.
    • Select all transactions that belong to the same entirety (lump-sum payment, payments of the sales invoices and the finance company’s fee).
    • Allocate the selected transactions.

  9. Check the end result of the balance sheet specification.
    • Make sure that the total sum of the transactions in the Open amount column matches the account balance.
    • In the example, the end result looks like this:

  10. Use the additional functions of allocating transactions.
    • Select Show only open transactions to easily find the entry rows and vouchers that form the account balance.
    • If you accidentally link the wrong rows together, undo the allocation you created by clicking the link icon visible on the left side of the row.

Bookkeeping accounts used in the example

  • 1717   Intermediary account for processing factoring payments, entries from the bank statement are made to this account and sales invoice payments are acknowledged against this account.
  • 1718   Factoring sales receivables account (Sales/Basic data and settings/Factoring account management).
  • 1910   Bank account.
  • 3000   Sales.
  • 2939   Value-added tax liability.

Bookkeeping entries and accounts receivable transactions

Frequently asked questions

Question: How does the overall factoring invoicing process proceed in Netvisor?

Answer: The process proceeds so that you establish a factoring account and an intermediary account, create a payment method for mass entry, create and send the factoring invoices, record the lump-sum payment from the finance company from the bank statement to the intermediary account, record the payments to the sales invoices with mass entry, record the costs charged by the finance company with a separate voucher and finally complete the balance sheet specification for account 1717 using allocating transactions.

Question: Why is a separate intermediary account needed for processing factoring payments?

Answer: The intermediary account is used because the finance company pays a lump-sum payment for the invoices and deducts its fee directly. With the intermediary account, the lump-sum payment, payments of the sales invoices and the finance company’s fee can be allocated to each other so that the total sum of the transactions is zero and the balance sheet specification matches.

Question: How do I record the lump-sum payment from the finance company and the payments of the sales invoices?

Answer: Record the lump-sum payment from the bank statement to account 1717 Intermediary account for processing factoring payments, preferably using a posting rule. Then record the payments to the open sales invoices with the Mass Payment Entry function, select the payment method Factoring payment entry for the invoice and use the same payment date as for the lump-sum payment.

Question: How do I ensure that the factoring transactions have been allocated correctly in bookkeeping?

Answer: Open the account-specific entries for account 1717, link the bank statement entry, the payments of the sales invoices and the voucher for the finance company’s fee with allocating transactions and check that the total sum in the Open amount column matches the account balance. You can show only open transactions and, if necessary, undo incorrect allocations from the link icon.

Question: Which bookkeeping accounts are used in the factoring invoicing example?

Answer: The example uses accounts 1717 Intermediary account for processing factoring payments, 1718 Factoring sales receivables account, 1910 Bank account, 3000 Sales and 2939 Value-added tax liability.

Question: What happens in accounts receivable when factoring payments are recorded with the mass function?

Answer: When you record the payments with the mass function according to the finance company’s breakdown and use the factoring payment method, the sales invoices move to paid status and MS vouchers are created in bookkeeping that relate to the processing of factoring payments.

Question: How is the factoring notification related to sending the sales invoice?

Answer: When you send the factoring invoices, the sending process automatically includes both the factoring notification and the sales invoice to be sent, and bookkeeping vouchers are created from the sent invoices.

Keywords: Factoring invoicing, accounts receivable, bookkeeping, payment processing, posting rule, allocating transactions.

This article has been translated using an AI-based translation tool. The contents or wording of these instructions may differ from those in other instructions or in the software.


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