Effortlessly Manage Your Account Invoice for Logistics

Account invoice for Logistics

[Music] welcome to the udrive you network my name is kenny long and on this episode we are going to talk about quickbooks and entering factored invoices in previous videos i talked about invoicing and i've talked about receiving money but the way that that's done when you factor in invoice is completely different and requires a lot more steps so i will talk about how it works why it works and then we'll dig into quickbooks online and i'll show you how the entries work so the biggest problem with factored invoicing is how it works and the misconception of what factoring actually is from an accounting standpoint factoring is a loan the factoring company loans money against the invoice it doesn't matter from an accounting standpoint it doesn't matter if it is a non-recourse or a recourse program you have an agreement with your customer whether it's a broker or shipper for the purposes of this video we'll just say your customer so you have an agreement with your customer you move a load for your customer and that customer owes you money for moving the load you have an a different agreement another agreement separate agreement with your factoring company they provide a different service they advance or loan money against your receivables your invoices your asset accounts your agreement with your factoring company is completely separate from your agreement with your customer what's important to note is your factoring company does not have any agreement whatsoever with your customer the only relation they have is you have agreed to allow your customer to pay your factoring company on your behalf you've allowed your factoring company to receive money on your behalf so when the factoring company loans you the money they get paid back your loan is paid off when they get the check from your customer but the two do not have an agreement together that's why it's important in your bookkeeping system in your accounting and specifically in quickbooks which is what i'm encouraging everyone to use to keep these transactions separated so how do you do that well in my video that i've done in the past about invoicing i showed how you create an invoice and you send it to your customer that process is pretty similar you still have to create an invoice to show that your customer owes you the money then you show that your factoring company has loaned you money so you create a loan payable in the amount of the invoice there is no relation between the invoice and the factor there is no relation between the invoice amount and the factory amount other than it is the same amount because that is the asset that your factor has loaned the money against but the two are not tied together they are actually two separate transactions on the books so you'll create the invoice for your for your customer and you'll create a loan payable for your factor and then you will hold money in reserve and deduct any fees when they release it to you so let me talk you through it first then we'll show it on the quickbooks online to show how it's entered let's assume that your factoring company holds 10 in reserve and does a 3 fee and let's say you do a load for one thousand dollars so you will show the invoice to your customer for one thousand dollars it doesn't matter if you send the invoice directly to the customer yourself or if you allow your factoring company to do that for you on your books you still need to create an invoice to show that you have receivables open from that customer then you will show an account payable a loan payable which is an uh liability account payable to your factor the factor will give you the money you will put that money in your checking account and to balance that amount in your account you will create that loan payable account then you will create a reserve account which is an asset account that is your money the factor will put some of that money into that reserve account and so you will show money going into your bank account money going into a loan payable account and money going into a reserve account no money goes into your checking account because the factor has already loaned you advanced you that money the factor will then release the reserve you'll deduct the amount of the factoring fees from that reserve account and then the remainder will go into your checking account here we are in the quickbooks online dashboard this is a screen that comes up when you first log into quickbooks online we just did a load for one thousand dollars and now we need to create an invoice to our customer for one thousand dollars if you need help on creating invoices click the link above or in the description and watch my video on invoicing first and then we can continue on for the purposes of this video i'm going to create a quick invoice without a lot of detail just for the sample so we're going to create an invoice to our sample broker and the terms are net 30. these are the terms you have with your customer has nothing to do with your factoring company we're going to say that we sent this out on august 1st which gives us an august 31st due date and it was a line hall flat rate i am using a sample account so it there is no tax on your version uh it will my version may be a little different because i'm using a sample account balance due of one thousand dollars and we will save this and we will exit out of this and go back to our dashboard now before i started i created a sample checking account with zero dollars in it i haven't created any deposits into this account yet just to show you how the flow of money works here you can see that we just created the one thousand dollar invoice which is outstanding here and next we have to receive the money from the factor so we're going to go up to new we're going to create a bank deposit the customer is not paying us so we are not receiving a payment we're creating a bank deposit so select bank deposit and this is going to go into our sample checking account whatever checking account you use and date august 1st this is the date that we created the invoice the factoring company is kind enough enough to give us money on the same day so we're going to receive that from our sample factoring company this can be whatever your factoring company name is and it is going into an account that we now need to create they are giving us a loan which is a current liability so select other current liabilities for account type detail type is a loan payable so create an account other current liabilities under loan payable and we call it factor loan payable and for description we'll just copy and paste and we will call it a factor loan payable there as well copy and paste save and close so we have this liability account and they are buying or loaning against the entire amount one thousand dollars so they are opening a loan for one thousand dollars against our invoice however the total of one thousand dollars is not what goes into our bank account they are going to hold 10 percent in reserve so we need to create another account add new this one is other current assets and detail type also other current assets and we will call it factor reserve account and again we will copy and paste save and close this is a negative 100 subtracting 100 from the 1 000 now if you understand double entry accounting the 1 000 is a credit to your liability account and the 100 as a negative here is actually a debit to your reserve account so that totals 900 this 900 deposit is what's going into your checking account so we will save and close this and now it shows that we have one thousand dollars of invoices because our customer still owes us one thousand dollars however in our checking account we have nine hundred dollars cash if we look at our chart of accounts we could see our checking account nine hundred dollars and our factor reserve account has one hundred dollar balance the factoring company is still holding one hundred dollars and our loan payable of one thousand dollars we actually still owe the factoring company one thousand dollars so let's go back to our dashboard that is all that you need to do on the first day so now let's say the calendar is ticking by 30 days goes by and your customer pays you notice i say the customer pays you because they're not paying the factor they are paying you they're just sending the check to the factoring company they are writing a check because you authorize them to pay off your loan so how do we do that this is where it gets a little trickier they owe 1 000 so let's go up here and receive money on that invoice receive a payment select receive payment select that customer the sample broker that invoice automatically comes up it's outstanding quickbooks wants to know what you're doing with this money you're going to deposit to this is the most important part of this transaction undeposited funds undeposited funds imagine somebody writes a check and hands it to you that releases their obligation they have paid you the check is in your hand but you have not deposited it into your bank account yet so the customer paid that money is held until you clear it in your bank account so make sure that you deposit it to undeposited funds we're going to select the invoice of one thousand dollars and make sure also that you change the payment date to the date that they actually paid you don't want to miscredit their account so the date they actually paid which should come on a report from your factoring company will say that they paid it on time save and close now that we received the money from our customer you can see that we have one thousand dollars that is not yet deposited our bank account still has the 900 that the factoring company applied and if we go to our chart of accounts under the factoring accounts our reserve account still has the 100 that the factoring company is holding and the loan payable we still owe the factoring company one thousand dollars so let's go to bank deposit and deposit the money that's in our undeposited account select the a plus sample broker the one thousand dollars that they paid us quickbooks is holding on to this they know that this money is hanging out on deposited they want to know what you want to do with it select that amount and then select receive from your customer and applied to your factor loan payable the entire amount was paid into that loan so select a negative one thousand dollars that shows zero dollars is being applied to your checking account however when you pay the loan once the factoring company receives this money they will release the reserve account so now we can select the reserve factor reserve for 100 that's the total of 100 that they are paying us they are giving our money back however once again they are going to hold their fee now in our sample let's say that their factor fee was three percent now it is not three percent of the one hundred dollar that they were holding it was three percent of the entire one thousand dollars that they funded us so that's thirty dollars so again we will create a new account add new this is an expense account and we can call it bank charges and we can call it factoring fees and again we'll just copy and paste for description save and close factoring fees and again this is minus 30 it's an expense which means seventy dollars total will be deposited into our checking account save and close now we can see from our chart of accounts that our checking account has nine hundred dollars that they originally deposited plus the seventy dollars that they released to us minus the fees if we go back to our dashboard we have one thousand dollars is now deposited and no overdue invoices and that's it that's how you receive money against a factored invoice