Quickbooks For Trucking: Factored Invoices
Channel: You Drive U / TWA ft. Kenny Long
Date: 21/09/2020

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https://quickbooks.grsm.io/YouDriveU

To learn how to create an invoice, check out this link:
https://youtu.be/ML-QPk8acM0

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I get a lot of questions about how to enter a factored invoice into an accounting system such as Quickbooks. There is a lot of confusion about this because of the misunderstanding of what factoring actually is; a loan.
When a factor buys an invoice it does not close out the transaction. In fact, to enter it properly in your accounting system it opens a separate new transaction and makes the whole process much more complicated. That's where the confusion starts. Here is the proper way to enter a factored invoice. 
Example:
You deliver a load and create an invoice for $1000 in your accounting system. This shows that you have an open account receivable with your customer. 
Let's assume you work with a factor that advances 90% and holds a 10% reserve. 
Your factor buys this invoice from you and you record a deposit into your bank account for $900. 
Your customer has not yet paid so this money can't yet be applied against the original invoice. You also have to account for the reserve amount held. To do that you have to create a Loan account as a liability, and reserve account as an asset. You will enter $1000 in the loan account and -$100 into the reserve account. This will balance as $900 to show the amount you have received as well as the amount still owed to you. 
At this point you will have these accounts.
Receivable from customer: $1000
Bank Account: $900 
Loan Payable: $1000
Factor Reserve: -$100
Now, 30 days later, your customer pays the invoice. Your factor reports this to you and releases the reserves but keeps their 3% fee.
That entry works like this: 
You receive a payment in the amount of $1000 against your invoice. In Quickbooks you will deposit those funds into an "undeposited funds" account to balance the invoice but also allow you to work with these funds and balance the other accounts you created. The invoice from your customer will now reflect as paid. If you enter the dates of payment you can track days to pay information which can be very important information. 
Next you will create a bank deposit. The $1000 undeposited funds will automatically appear but in actuality you are only depositing the difference of the reserve amount being released to you.  You will need to apply this payment to the previous accounts from before. This is done in 3 steps...
1. You will balance the Loans payable account with -$1000.  
2.The factor will release all of the reserve so show $100 to balance the -$100 in the account.
3. They will then take 3% or $30 as their fee. You must create an expense account for Factor Fees and apply this amount. 
You will be left with $70 which will go into your bank account and close the transaction. 
At this point you will have:
$1000 Gross Income
$970 in your bank account. 
$0 as a loan. 
$0 in reserve. 
$30 as a factoring expense. 
All of your accounts should balance and be reflected on your balance sheet.



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