Create and Manage Your Account Invoice for Accounting Seamlessly

Account invoice for Accounting

knowledge is power make an impact by learning more cause right now for more help at eight six six nine four five eight zero sevens factoring receivables in QuickBooks Online so we're looking at an accounts receivable aging detail all based on some invoices that were posted on March 1st and all of which we've sold to our factors so we want to get this recorded and as I mentioned in the write-up the temptation is going to be to receive payments on these invoices but that's not the correct thing to do because these invoices haven't actually been paid yet all you the clients still owe you the money so you definitely want to keep it on record in your accounting that the client still owe you this money and consider especially if your factor has recourse meaning they can force you to buy the invoice back if it doesn't collect get collected in a certain period of time then the client will definitely still owe you the money so the bottom line is this doesn't mean these invoices are paid in fact it makes the accounting very simple because all it means is that you've been loaned money by the factor granted these invoices kind of sit behind that loan as the basis for how the loan amount is arrived at and so on and and this'll make sense a if you've read the write-up and B as I show you how we do in fact record this part of the transaction so at this point you should have a report back from your factor that looks something like this granted this is somewhat simplified but essentially you need to be able to get this much information out of your factor they should itemize it by invoice number and sorry I'm in the wrong tab here let's stick with the purchase advance this is the first part so these are all the same invoices notice they total the thirty thousand ninety 709 notice that's my total here all right that should be the first thing you check is compare the invoices that are listed on the factors report with the invoices that you in fact so make sure that much agrees to start with then make sure you have this much information they usually will list your customer they will list your invoice number that you sent to your customer the invoice date the due date doesn't really matter that much if that's their but it's ideal just so you have all the information about each invoice in this report right most importantly we need the gross amount of each invoice itemized by invoice number so we know exactly what they're funding you for right there's going to be serve amount taken we're using the assumption here that they take out 20% right and you're gonna see later the assumption on the factored fee is that the fee is 10% meaning they're still gonna owe you some money back once these invoices are paid and that's typically how they do it they reserve more than the amount that covers their fee in case you know in case they aren't able to collect their in case you wind up their position is they want don't want to wind up with a situation where you owe them more money and they have to collect it from you that's kind of the idea so it's almost like a security deposit they force you to keep with them and oftentimes they'll maintain that kind of ratio so that as invoices are collected and more invoices are sold to them they want the total reserve account to be something let's say using this example in the range of 10% of whatever you have outstanding with them so as long as we have this information then we can record the transaction very easily we're gonna go into QuickBooks and we're simply going to record a deposit nothing paid on these invoices right so we're just going to go into the quick create and say bank deposit now what I do suggest is that you do itemize it by invoice number because that creates a good audit trail for you know reconciling information that's in your QuickBooks company with information that the factors provide you with after the fact so no receive from necessary the account is going to be loan payable right there giving you money it's a loan so it's a loan payable so we're gonna say we'll call it factor alone payable just so it's really clear and I'll add that end because if you're doing this for the first time you're going to need to [Music] okay and this is going to be another current liability and in the detail type because you're required to put something here just make it also other current liabilities double check the name sometimes in quickbooks online when you change the detail type it renames the account so make sure that's still intact and let's say save and close and we want to list the amount of each invoice separately here all of them going to the loan payable but this way we can be detailed in our description so I have invoice number 12 44 for Barry Allen and the amount of that invoice is the full amount they met that loan rather is the full amount of the invoice the difference is going to go to the reserve okay next line you can copy that over and we're going to say invoice number 12 47 and again full amount of the invoice [Music] next one is invoice 1245 [Music] full amount of the invoice next this 12:41 [Music] again full amount of the invoice almost there copy that down invoice number 12 48 full amount [Music] 12:43 now the reserved you don't have to itemize but first check that we've got the right total thirty thousand ninety seven dollars and nine cents right the difference the whole amount goes to reserve I don't think you need to itemize the reserve by amount but you certainly can it will show up nicely in your reserve account actually if you do but for now and in the interest of time I'm just going to book this full amount to the reserve so we're just going to call this factor reserve account this is a receivable this means they owe you the money it's money they aren't giving you against those invoices they're holding on to it as I said earlier is kind of a security deposit so for the account type when we're creating this it's going to be other current assets and the same with the detail type goes to other current assets in fact the reserve account save and close' and this is going to be what you could do actually is you could just list all the invoices at once in the memo invoice numbers 12:44 1247 1245 1241 twelve forty eight and twelve forty three and of course the amount is going to be negative right so we're gonna take this sixty 1942 as a negative number and that should bring us to the correct net amount 2400 77 67 2400 77 67 of course before you save this make sure this in fact agrees to what you received in your bank account and it should also agree to the total in their report right so as long as all of that agrees then we can say save and close and we're done with the first part now factors as I said earlier have been getting better and better about giving you the right reports reports that make it easy to do this and easy to follow and also keeping the transaction type separate and by transaction types I mean they will keep in a separate report and a separate funding loans that they've made to you based on invoices that you've sold to them versus settlements where money has come in so years ago I used to see reports that had it all mixed together and it just made it very difficult to follow but like I said factoring companies much much better about their reporting and I think part of that has also included being much better about the way they fund so they keep things separate they keep the again the sale of the invoices in one transaction and any settlements based on invoice payments they've received in a separate transaction so this is a good place to stop if you have something like this to record stop and go record it go and take your first report from the factor for the first group of invoices that you've sold them and make sure that you can get this far make sure that first of all that you can get a report that it may not look like this it may look a little more complicated than this honestly most of them will but you should be able to pull this information out of it if it's not laid out quite as clearly as this and if you don't have a report like this then ask them for it they'll usually be able to produce it for you and honestly if they can't produce a report that gives you this kind of information based on the transaction then I would strongly consider finding another factor all right anyway as make sure you can get this part done before you move on to the next part because if you can't get this part straight the next part is going to become infinitely more confusing because it's more complicated not much more but more complicated nonetheless so pause the video if you have to get caught up and then resume the video and we'll walk through the second transaction which is when your invoices have been paid or some of them have been paid okay so now let's get paid let's say it's a month later and not all but some of these invoices have been paid Tony berry and Diana have come in and they've paid their invoices now it's time to receive payment and we're going to receive payment on the full amount of the invoice right the invoice amount here is what we receive payment on so again you should have a report from your factor that gives you this information it may not be quite laid out quite this clearly although ideally it would be there are companies I've seen where it certainly is the bottom line is you should be able to get this information out of the report they send you in whatever report it is whatever they call it when they're notifying you that invoices have funded and they have now you know settled those invoices and you know either paid you any difference or in some cases they may put the whole net amount into the reserve just to again balance that ratio out that I was referring to earlier where they need to maintain the reserve at a certain percentage of what you have outstanding with them so pay attention the report - it may not mean that you got this money it may mean that it's going into the reserve account and we'll cover at the end of this you know the situation where they put this into the reserve and then they release another amount something smaller maybe something greater maybe now you have more in the reserve than what they need to keep to maintain that ratio so some factors will take the net amount on a settlement stick it into the reserve first and then in a separate transaction fund you an amount out of the reserve that keeps them at that ratio that they're trying to maintain so the first thing is to receive the payments and even though this is not what you receive we still have to receive them at the gross amount so let's do that we're going to go into the quick create we're going to go to customers and we're going to receive payment okay and the first one is for a Tony Stark and the payment date is the date that the factor company tells you they got the payment from the customer that's remember what we're doing here is not actually receiving a payment we're giving the customer credit for having paid which means just record-wise that really should match up with the date that they actually that the factoring company got payment on that invoice so let's just say it's April 15th and the deposit - absolutely should be undeposited funds has to be because you're going to want to group these payments that they're reporting together in a single deposit and you'll see how that all comes together for those of you who understand how undeposited funds work then this is academic for you all right so we're going to check off the invoice for the full amount again pretending for a minute like we did get the full amount of course you can put in if they paid by check oftentimes the factor will provide you with that information and let's go save and new okay and then Barry Allen pays his we check it off the full amount save and new and then Diana Prince pays hers check it off save and new so that part as you can see it goes pretty quickly okay and thank you QuickBooks that's funny they're trying to in a sample company fell trying to get me to sign up for their online payment service QuickBooks payments actually works great by the way I actually do highly recommend that I do use it myself alright so now we've gotten paid alright and this is back dated so it's not going to reflect that but if I update this to April 15th the date we got paid and I run this we should see that those invoices now come off the air aging we're left with the three who haven't who we still haven't paid right so that part works now we need to finish recording the transaction though like I said we've given the clients credit for having paid the full amount of their invoice but that's not the amount we're getting right assuming that this is being funded to us directly then the net amount we're getting is this twenty one twenty six eighty nine so we need to record a deposit now that takes these gross invoice amounts then shows that we've now paid off the loan that they had made to us right and then consider take the fee into account right and then there's the net payout right and so this part is where it gets a little tricky so you know again plan on pausing and resuming and if you have a set of transactions like this to record it's a good idea to just move through it nice and slow the first time once you do one or two of these it'll start to make sense it will start to come together I can promise you that okay so we've got payment now we're going to go record a deposit in QuickBooks Online bank deposit and the amounts that we've paid show up here because they're in undeposited funds right let's say that we're depositing and depositing it on the same date that they say we got the money so we're gonna just check these amounts off right and here we have them obviously itemized by invoice not sure why the reference or the reference number would be a check number for the payment itself not for the invoice right so we have these amounts and this is tied into the invoice so rest assured later we can go back into this transaction and click one of these and get back to the original invoice so that there's a very nice audit trail on this so we have the eleven eight 1603 which in fact is the full gross amount of what was paid right now this is where it can get confusing I've done this on purpose because a lot of the times the factors will show it this way remember that when we originally received the money we put the gross amounts of the invoices into the loan payable they will show you the difference between that and the reserve amount right so the full combination of these is really what's getting paid out of the reserve okay so that's what we need to make sure that we're showing on this so the way we recorded it was at the gross amounts the way we need to show the loan payoff needs to also be at the gross amounts so we're gonna put factor loan payable and again you can and I highly recommend itemizing it in the interest of time I'm not going to okay so the factor loan payable is going to be minus the full amount right now that already zeros out but now they have to give us back the reserve right I don't know why I didn't total that so they have to give us the reserve amount which would be 23 6321 except that now they charge us the fee right so full amount of the invoice comes back out of the loan now let's go to where's that reserve account factor Reserve account they're going to give us the money that they had originally withheld 23 63 21 okay so then that's the net amount now don't get confused by this this is only sub totalling this section here right it's down here where you're going to see the truth total and now we have the factor fee which is an expense account right so if we haven't added it already we're going to add it here if this is the first time we're recording this and this is going to be an expense and you could for the detailed type classified this as Bank charges the the the detailed type is not that important actually it was originally meant for a tax line mapping and my understanding now is that it's not even Houston for that anymore so let's it save and close we've now got the expense account for the factor fee oops there it is okay and this is going to come out of here the fees - 3630 - that's negative it's money being taken away from us right so this should cause the transaction to be the right net amount twenty one twenty six eighty nine twenty one twenty six eighty nine now again this should match the amount that came into your bank account should also match the amount right here this is my sort of spreadsheet based replica of what their report should look like essentially right and again if they don't have if they don't give you a report that lets you pull this information out of it then call them and make them give you the report it should be easy enough for them to spell it out here are the invoices that were paid here's what we took out for the fees you know here was the reserve amount and so on and so forth so and I wanted to make it real clear because you know we record the loan amount as the gross amount of the invoices because that's what ultimately the factor needs to get paid you could do it at the net a whole different video on another day or I've gone over that in one-on-ones with people where for they wanted this part to be a little more straightforward but I did this on purpose because this is what a lot of you are going to see when you get the report back from the factor right the advance plus the reserve equals the gross amount bottom line is as long as you have all three pieces of information then you'll have no problem recording this transaction okay so we've got the information all laid out so the only other scenario on this is as I was mentioning earlier they don't actually give you this amount they will throw this amount into the reserve and then they'll take another amount out of the reserve whatever it takes to get that reserve balance in sort of compliance with whatever they're required ratio is and that amount is just going to be deposited into your bank account and at that point you take it out of the reserve so that's really almost just like a transfer so let's say that that is in fact what happened here because at this point if that's not what happened like I said it's you simply just going to hit save and close' here and save the deposit but let's say that's how your factor does it let's cover the most complicated potential scenario here then you need to zero out this deposit at this point really easy to do we're gonna put that amount actually what's going to happen is there's two ways to do it I like laying it out like this because you kind of have all of the details and essentially then we put this net amount 21 to it 26 89 back into the factor Reserve so minus 21 26 89 it's minus because it's money we theoretically would do that we're not receiving so it's like it's being taken away from us but it's really going back into that Reserve account and I'm going to show you that next so let's hit save and close okay nothing changed here on accounts receivable right it backed up to my original date of March 1 if I go back to let's run this as of today now just click in there and hit a t if you ever just want to get today's date run that and you'll see now it just shows the three invoices that have not yet been paid but let's run the balance sheet I want you to see what this looks like now and I want you to see how to kind of audit this stuff the only thing that's on the P&L out of all this is the factored fee and I'm sure that's pretty straightforward so if I look at this here's my factor Reserve account it's got 57 83 10 in it why because we took that factor amount that we would have gotten in the net check and we added it back in here right so 60 1942 came in from the original transaction right that's here then we got the settlement and the 23 26 21 and theory came out but then after the fees we put the difference back in right so that's the 23 2016 3 21 coming out it's all in the same day so it sorts it by amount and this is the 21 26 89 that we effectively put right back in so that net net that comes to 57 83 10 so if at this point the factor said hey you know what we let's go back to what's left on the report on the receivables right what we have left would be I'm just going to keep it simple here the total of these guys which means they want 20% of that on account right so let's say the amount that they want to keep in the reserve is 25 14 46 right that's what they're gonna want to compare this number with so 57 83 10 right what though they'll give you back the difference and if you're not following us don't worry too much about this it's you know it's just to give you an idea of how they kind of do things in a lot of cases not every case but in a lot of cases they just want to maintain a certain ratio so these three invoices are still unpaid totals 12 572 31 they want to keep 20% of that in that reserve account at all times and that comes out to 25 14 46 after that settlement our total reserve is 57 8310 the difference is what they'll release to you so this would be one of those cases where they're going to give you more money than what you would do just from the settlement alone because with what remains on account they don't need to keep you know that they don't need to keep the whole difference after this right so now let's record that last piece basically we just need to record the net amount that they're going to give you as a deposit and it's going to go against the reserve account so again we're gonna record deposit this transactions really easy to do right so again we'll assume it's on for 15 this is going to be from the reserve account okay the amount thirty to sixty eight sixty four let's record it like two days later just so that on the report it shows up nice and clean and separate right and this will be just a release right or a reserve release this is what they'll do and so save and close that and there's the reserve release so now we're back at the twenty five fourteen forty six which is what I again in my example in calculating that they want to keep on account and so that's how that's going to work so now your reserve account again two days later shows the release and those are the funds that would have actually come into your account as a result of the April fifteenth settlement that happened right so the settlement happened the net amount of that settlement was actually only where did it go 21:26 eighty nine add that back into the reserve compare the reserve with the minimum requirement and then release the difference a lot of factors we'll do it that way that adds sort of a layer of complexity as you saw but the transaction itself as you just saw really really easy to record so let's go back to our balance sheet and then the other account we want to look at is the loan payable account right so the fact their loan payable let's make sure we're clear on what date we're looking at here okay so originally when we sold the invoices we owed them thirty thousand ninety 709 right remember that was the original amount that we sold them that they funded us on of course they only gave us the difference after the reserve on that but we we owed them thirty thousand ninety 709 in theory if our customers didn't pay we would either owe them that money or they would force us to buy those invoices back one way or the other we would have to settle with them for that amount then on April 15th the settlement came in this is the eleven eight 1603 right that we received on the settlement which is here these were the invoices that were paid eleven eight 1603 another reason I like to record this based on the gross amount the audit trail is nice and clean I had these in the total invoice amounts and then this is what was received on April 15th so now the amount due to them is the 18 280 106 and again in case you're confused and I'm sorry if I've confused you the difference would be some people will just record the actual advance amount as the loan payable but I don't think that's the best way to do it I'm not going to say it's not the right way there's no right or wrong here as long as you get to the right net amount and as long as you can get your reports that you know to agree to the factors and of course a long as the information ultimately is actually right what did you borrow from them what did you pay them back what was what did it cost you right that's the important thing at the end of the day but the other way to do it would be to just record the net advance amount as the loan payable and of course the difference in the reserve I just think this is cleaner it's more detailed and the evidence of that I think is right here right because we can see everything that came in that we sold them and everything that came out everything that got paid at the full gross amount of those invoices that my friends is a half an hour free video tutorial on factoring receivables and quickbooks online how to record it like i said lots of improvement on the way the factoring companies are reporting on this I've run across a few companies in particular that have I've seen you know firsthand where that I would agree they have great reports so if you're interested in finding out more just reach out to me and I'll be happy to share names of companies with you I just didn't want to do it on YouTube you know mentioning other companies names and things so just reach out to me I'll let you know what companies I've had good experiences with happy to do it happy to help you get in touch with a factor that will best serve you in terms of getting the funding that you need and ultimately being able to record the activity nice and clean in QuickBooks Online as always I hope you had some fun here learn something along the way I hope you're having an absolutely fantastic day and I look forward to seeing you on the web