Accounting for Factoring Receivables in QuickBooks Online

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THIS JUST IN... My Bulletproof Bookkeeping ™ Guide to Factoring Receivables course is now live:
nerdyurl.com/factoring
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Index
0:22 AR Aging Detail report shown on screen
1:30 Report from receivables in QBO
3:20 As long as that information on screen is available you can record the transaction
3:32 Quick create and create a bank deposit
4:14 Add in the chart of account
4:50 Recording the Bank Deposit
5:32 Keep adding in the invoices line by line
7:40 You may also list all invoices in the memo
9:59 Make sure adding in the invoices to the bank deposit is done before the next step
10:31 Let's get paid, receiving payment on full amount
11:54 Receiving the payments at the gross amounts
12:59 Check off the invoice and save and new
13:12 Next customer pays his invoice and so forth
13:41 QuickBooks payments is great, Seth uses it
14:44 Recording a deposit since they are sitting in undeposited funds
15:48 Attention! Where it gets confusing, make sure it's at the gross amount
18:30 This amount should match what came into your bank account
19:21 Bottom line to be able to record the transaction
21:17 How to audit your work, to be able to trace your audit trail
23:41 Recording the net amount you will receive that will go against the reserve account
25:10 Checking balance sheet and loan payable amount from previous transaction
This content is for information purposes only and should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Nerd Enterprises, Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Nerd Enterprises, Inc. does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.

Опубликовано:

14 июл 2024

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Комментарии : 79

@woodbridllc9344 4 года назад

Seriously Seth? Are you real? You made these factoring transactions so easy to understand, all of them...and believe me I don't understand English very well...but I understood everything you said!!!! I will put you a red carpet everywhere you go!!!! THANK YOU SO MUCH!!!!

@nerdenterprises 4 года назад

Thank you so much!!!!

@kathybennett142 4 года назад

This video is the best I've seen explaining the bookkeeping of factored invoices. Thank you for sharing.

@nerdenterprises 4 года назад

Why THANK YOU Kathleen!

@Tiffany.B. 2 года назад

I agree. I'm a new bookkeeper and I want to niche down to owner operators. This is a service I want to offer but I couldn't find a good tutorial on it until now

@phyllisjrcrestorationdecordesi 4 года назад

FINALLY! the breakdown of factoring invoices that makes so much more sense to me! Thank you!!

@tonyprince916 5 лет назад

Thank you so much! The instructions I got from the factoring company were complete crap, but this made it crystal clear. Thank you for your time explaining the ins and outs of how to do this properly!

@nerdenterprises 5 лет назад

Thank you! I am so glad this helped!

@hannahsilva7443 2 года назад

This was invaluable to me - thank you! I am cleaning up back books and I'm not an accountant, but the wife of a business owner. So grateful for the help. Also, I just found out that my factoring company charges way less than most, so that was awesome to know, too! :) Many thanks!

@nerdenterprises 2 года назад

Thank you! I am so glad you found it helpful! You should see my course on this subject ;)

@Jay-tt3px 3 года назад

You're the best! Thank you!

@CJ-bk8tt 3 года назад

Just wanted to say thank you! 3 years later and this video is still proving itself to be valuable. Again, thank you.

@nerdenterprises 3 года назад

Amazing, thank you so much for sharing!

@leagbor 3 года назад

@@nerdenterprises Hello, kind of three years late. What happens when the invoice is “recoursed” And other adjustments?

@nerdenterprises 3 года назад

@@leagbor It's a little involved for comments on RU-vid, but essentially you have to follow the money. If the factor forces you to buy the invoice back (recourse) then you have to repay any amounts they advanced you against that invoice, possibly plus interest, and now it's back on you to either collect or write it off as bad debt.

@lesliemeadows1490 5 лет назад

Thanks for your reply.

@AmyNoelonDyslexia Год назад

4:50 making the bank deposit.

@nerdenterprises Год назад

Thank you. We've added this into the index in the video description.

@tabezona85 Год назад

Best factor invoice video in youtube. But... Here's a challenge for you. How do you record in QB a partial payment because the factor paid one of your vendors directly? Client Invoice $1000 Vendor bill directly related to the client invoice above $800 Factoring company paid $800 to my vendor. My initial deposit $150 Factoring fee $15 Escrow account $35

@lesliemeadows1490 5 лет назад

BTW our business is cash basis if that makes any difference in the manner it is entered but I do use the correct date for deposit received and payment date

@jessicahill3545 2 года назад

Thanks for explaining the factoring on this video. I am having trouble with the debits and credits and how the Loan Payable gets cleared. Any way to get a journal listing for each of these 3 steps in your video?

@user-yk2bv1sl3q Год назад

Can you do another video from the vantage point of the factoring company?

@melissajones857 4 года назад

Thank you for this video! It helped me so much. I do have one question.. what do I do with all the ACH transfers for these payments made that are still in my "banking" section waiting to be transferred into quickbooks online?

@nerdenterprises 4 года назад

Hey sorry I missed your comment. If you have transfers from the factor, they are either the original loan amount, which the video explains how to handle, or they are fundings after the original loan which means you have to refer to the factor's reports to find out what invoices were paid, how those were applied to repay the loans, account for any fees and escrow, and then the funding (ie the transfers into your account) are the difference they owe you back. I think to give you a better answer I would need to see what's going on in your books and with the Factor reports etc...

@s.victoriavindas488 Год назад

Hello! I have a Question What is the best way to register when the factoring company does not keep reserves and the just pay the whole ammount with "Fees" , and "Expeses" Deducted ?

@nerdenterprises Год назад

It's the same process, but you don't need to account for the reserve. So the Loan amount is the total invoice amount (same as in the video) and you'll deduct the fees etc... and that will reconcile with the net amount deposited into your account. Then when the client pays, you wipe out the loan amount, and write off the receivable. Presumably you don't get any of that money since the factor advanced you 100% of the invoice.

@LUIZAT2004 Год назад

Thanks for the clarification. And what about the interest on the operation. Beside the bank fee, there is the finance expense.

@nerdenterprises Год назад

Assuming that is deducted from their payments to you, it would be handled the same way - as a deduction from the deposit booked to interest or finance fee.

@jaybook Год назад

Thank you for this video Seth. The visual on top of the explanation makes this pretty easy to understand. Of course real life is less than ideal, but this is a great foundation. I was wondering - what's your position on the different way that more people(from what I can find) are teaching this, especially in regards to factoring with recourse? Specifically, you set up a loan whereas other sources are crediting A/R to sell the invoice to the factor. And then there's a recourse liability as well. Personally, I prefer the way you teach it, especially if by creating a loan for the full invoice the recourse liability is built in.

@nerdenterprises Год назад

Hey Justin! Thank you for your kind words. My issue with recording a credit to A/R is that we're marking a receivable as paid before the customer has paid. We're effectively marking something as paid that the customer hasn't paid yet. In short it's not bulletproof. It's BulletHOLE accounting. FYI I have a course on this that goes even deeper and also offers a few pretty slick (my opinion of course) templates to help you calculate and track everything: www.nerdenterprises.com/v2-factoring-receivables

@jaybook Год назад

@@nerdenterprises thanks for the info Seth! I will keep that course in mind because I'm a new bookkeeper and I may want to make trucking(which I've heard is a common industry that uses factors) companies one of my niches. Does that course offer any support if you're still stuck on something? One more question for you if I may - I recently watched your other video, which is older, on this topic but for QB desktop. In that one, you had made the loan the amount of the advance instead of the gross amount, and you took out the fee on the first payment as well as the second. On the former, is that a preference thing or have you changed your preferred method to the gross amount? On the latter, is that just dependent on when the factor deducts their fees?

@nerdenterprises Год назад

@@jaybook After years of working with many clients 1:1 (many as a result of that older video you saw) I realized that from the Factor's perspective the Loan amount was the gross amount of the receivable. So while the old way was correct in the sense that everything would reconcile, this way is more "Bulletproof" because we can tie our balance sheet to the Factor's reports.

@jaybook Год назад

Thank you so much Seth for clarifying that and for your time :)

@nerdenterprises Год назад

@@jaybook My pleasure.

@kwamehorton9054 3 года назад

It seems you could have explained this a little simplier as most companies do not put the money their factor fund company is holding for them, hence the term "reserve", directly into thier bank account, instead the reserve goes into the factor funds bank account. I know you attempted to explain that approach next, but why not explain this approach first? But thank you for the video.

@morreenklement9345 3 года назад

This has been so helpful! We will get our reports on a monthly basis. From watching your video, will we have to show our customer's invoices as unpaid until we get the report from the factoring company? Our customers are emailed links to see the invoices currently and we don't want to confuse them by showing its still unpaid even after they pay the factoring company.

@nerdenterprises 3 года назад

Thanks Morreen! Yes the idea is that you don't want to mark an invoice paid until it has actually been paid. The Factor isn't paying the invoices. They are advancing you monies against those invoices. Most factors have a portal you can log into so you can see any payments that came in. So you shouldn't have to wait a month.

@morreenklement9345 3 года назад

Gah! Of course. Thank you!

@kaitlynmacdonald2564 4 года назад

When I am adding my transactions from my accounts to QBO... my received money from factor... which manually entered bank deposit do I match it to? Or do not match it and add it separately?

@nerdenterprises 4 года назад

If you are entering your transactions correctly the deposits should match. You can't add them because you need all of the details that I described in this video.

@lauracrean6178 5 лет назад

Thanks for the video. I have two question; hopefully you can provide some insight. 1. Factoring company doesn't provide us with advance until we request it. I assume I wouldn't use 'Checking - 1234'/a bank account for Bank Deposit. Set up a current asset/advance account and I can show any request of funds via transfers into our bank account? 2. Factoring company purchases invoices end of each month. They purchase about 200 out of 210 invoices each month after I create these and send to customers each month end (invoices created & AR in balance sheet). In following the video I now have: - AR balance (or accepted and non accepted invoices) - an Advance account; and; - a Reserve account So duplication. I'm unsure if I should/can change where the invoice amounts go (default to AR in Chart of accounts)?

@nerdenterprises 5 лет назад

Hi Laura. Yes, it seems like you would set up some sort of an asset account reflecting the value of the sold invoices as what you can draw against. Then for item 2, yes, you have an extra asset account for the invoices you've sold, but didn't choose to get funded on.

@brendagallegos3 5 месяцев назад

Do you have a video on how to reconcile QuickBooks for factored Invoices

@nerdenterprises 5 месяцев назад

Hi! I have an entire course on the subject: nerdyurl.com/factoring This walks you through every aspect of the accounting for factoring receivables.

@harshalmagar16 5 лет назад

Can you confirm how we can clear the "Checking - 1234" account that you had created. As it will always show on the Balance sheet which is wrong.

@nerdenterprises 5 лет назад

Hi. That's the actual bank account. Of course that will always show up on the balance sheet. It is absolutely correct, I promise.

@kyliebarta621 5 месяцев назад

This was helpful. I do have a question, after receiving the deposits and such, receiving payments, and the company writes a check to the bank for the full amount. Will that check go to the NP Factor account to reduce it to zero?

@accounting-nerd 5 месяцев назад

That will only reduce it to zero if there are no other outstanding factored receivables in the Factor Loan Payable, but conceptually yes, the collection of the amounts from customers to the factor gets applied to the receivable and offsets the loan payable. Generally, the company does not write a check to the bank to pay off the loan because the loan is paid off by the customers when they pay their invoices directly to the Factor. If the customers pay the company directly, then they do need to turn around and repay the loan amounts to the Factor.

@mattc5268 5 лет назад

Is this recourse you are showing

@avi8641 Год назад

Thank you for this tutorial. How do I record in QBO transaction where my factoring company is actually sending the advancement to my vendors rather than awarded it to my bank account? Only once my invoices have been paid by the customer and the loan has been paid off, my factoring company will send the remaining money to my account. I've followed all the steps in the video but something doesn't add up. Thank you in advance!!

@nerdenterprises Год назад

Hey sorry for the delay in answering this! I would set up a bank account called, "Factor Clearing" or something like that. Then you can record the advances as deposits into that account while you set up the loan balance. Then you can record a bill payment out of that account to pay your suppliers. This way you get everything booked without it impacting your actual cash balance.

@NicoleDiVincenzo 2 месяца назад

How do you record invoices that were sent to the factoring company that did not end up being factored but the invoice amount was sent to the escrow(reserve) account?

@nerdenterprises 2 месяца назад

I'm not sure I follow. If the invoice was sent to the escrow reserve account, doesn't that mean that it was in fact, factored? If it was just an entry you made on the books, you can reverse it. I probably need a little more information to understand how to answer this properly.

@robynbanks1941 3 года назад

Hello do you have an email ? A way to get in touch with you? Or if you could answer my question. What should i do in the event after the 30 days have passed and i received payment from the customer but they short paid me? But the factoring company provided me with the full amount. How do i go about entering that when I’m doing the bank depositing part of the undeposited funds?? Pleaseeeeee help

@poiisedfan6810 2 года назад

What should be done with the bank feed, once the payment actually hits the checking account?

@nerdenterprises 2 года назад

If this is done correctly the transactions in the bank feed will easily match the ones you've recorded in QuickBooks Online.

@hannahsilva7443 2 года назад

Quick question - if you see this. Would you handle transactions from Square the same way? I'm trying to figure out how to manage fees in general for accounting. Many thanks!

@nerdenterprises 2 года назад

Square is pretty different. You're processing payments on sales, so the payments come in and you have to handle the fees, but there's no loan against them and no receivables behind it.

@hannahsilva7443 2 года назад

@@nerdenterprises Thank you!

@NaseemMatteson 4 года назад

How do you do Factoring people's bookkeeping in QBOA? Like how would they get these into their Accounting software? So when they paying the down payments and settlements, they are using Accounts receivable and Accounts payable, in 1 transaction.? Thanks

@nerdenterprises 4 года назад

Hi Naseem. I am not sure I follow the question. QBOA is just the accountant's portal where you manage your accounting clients. The above video shows you the precise process for how to record this in QuickBooks Online (which is the accounting software). As you'll see in the video above, we are not using Accounts Receivable or Payable for most of this. We have a Loan Payable, and Likely an other current asset for the escrow amounts that the factor withholds. The only time accounts receivable is used, is when the customer pays, and then we have to show the receivable as paid.

@NaseemMatteson 4 года назад

@@nerdenterprises Quickbooks Online Advance

@NaseemMatteson 4 года назад

@@nerdenterprises I'm sorry for the confusion, I'm trying to figure out accounting for a factoring business and I would like them to be on Quickbooks Online but they are using AP and AR in the same transaction. And that is throwing me off. Was looking for some help on ytube and came across this video, so thought to ask if you had any suggestions or videos on that? Thanks

@nerdenterprises 4 года назад

@@NaseemMatteson Hi, no that's a mess. I would untangle it and have them do it the right way :)

@NaseemMatteson 4 года назад

@@nerdenterprises what's the right way? I am so confused. Is there a sample or a video of the right way?

@jessicahill3545 3 года назад

Where is the write-up that you are speaking about?

@nerdenterprises 3 года назад

The link is in the description: nerdenterprises.com/factoring-receivables-in-quickbooks-online/

@thomasenzmann6225 3 года назад

Please someone tell me why factor reserved account needed?

@nerdenterprises 3 года назад

Many factors hold on to some of your money as a sort of security deposit. That's what the reserve account is for. If your factor doesn't do that, then you don't need it.

@thomasenzmann6225 3 года назад

@@nerdenterprises what's wrong if I treat it this way?......... make deposit from Factor Loan Payable with only advance. after when We get paid then receive payment to undeposited fund and transfer this fund deducting bank charge and loan payment to bank placing minus sign before bank charge and loan payment of specific invoice. (NB--I am a new qbo learner)

@nerdenterprises 3 года назад

@@thomasenzmann6225 The simple answer? Your books won't be accurate. I would want to know the true amount of what I owe on the loan, and I would want to know how much of my money the factor is holding onto. Also easy to mis-state fees (the expense or cost of this) when you're not recording things at their true amounts.

@nerdenterprises 2 года назад

THIS JUST IN... My Bulletproof Bookkeeping ™ Guide to Factoring Receivables course is now live: nerdyurl.com/factor-checkout