Sage 100

Need help with process in handling ""Factored Receivables"" in Sage 100 ERP 2014 please. Recording the advances through Journal entries and they recommend adding 2 GL accounts to record the Fee/Service Charge (expense acct) and a contra asset account to track ""invoice sold' amounts. The Financing entity has provided information on accounting through JEs but I am juggling with ideas on how to account for this business process through AR. I have been advised that the AR backlog must remain intact and that the advances against these open invoices should not be applied to them. But when the invoice payments are received they want the amount disbursed to 1. (D) Fee Acct (Service Charge paid monthly in cummulative amount 2. (D) Contra acct 3. (D) Cash Acct 4. (C) A/R Thanking you in advance for your time and efforts. I appreciate it.

What's the volume of invoices? Is this something they can just do manually when entering the cash receipt, or does it need to be an import?

Either manual or import. They are anticipating manual process. Impression I have is about 5-6 invoices paid by client a day that they would need to process AR CR on.

So in Cash Receipts, they would do the amount of cash that came in (the remainder). Then on the invoice line, they would put in the total amount of the invoice in Amt Posted, then do 2 additional lines of GL Type with one the Contra account and amount original received on that invoice, and the second the fee account and amount. So if the original invoice was 100.00 and they have already received 80.00 and now they are getting 18.00 and 2.00 is fee, you would have 18.00 as your deposit amount 100.00 as the amount posted on the invoice 80.00 as the GL posting line to the contra account and 2.00 as the GL posting line to the fee account 18.00 debit cash 80.00 debit contra 2.00 debit fee 100.00 credit AR

@Joan, where do payments for factored receivables get sent; to the factors bank or to the clients bank? If they are received directly by the factor or via a lockbox, then set up a new bank code for the factored receivables and use this bank code to report the payment receipts. Tie the bank code to the factoring liability account. As each payment comes in, record the amount received less the factoring fees to the bank account and then record the balance to the factoring fees account. If the monies are received directly from the customer by the company and the monies must be remitted back to the factoring agent, consider either setting up the factored customers in a separate division or creating a UDF to apply to the invoice to note that it is a factored invoice. Then, when you are processing the receipt of payment, you can make record additional lines in cash receipt entry to GL lines to record the additional offsets at the time of receipt.

@JoanSerr when I refer to recording the balance to factoring fees and to making receipt entries to GL lines, I am referring to the process @BethBowers documented in her reply. It works well for similar processes at some of our customers. Factored receivables are very common in the trucking industry.

Rockin' Thank you Beth and Thank you Shawn. They state that the payments will be coming from both - client and factoring entity. I added a new bank code when they started using a lock box but if I understand correctly a seperate bank code may be needed to manage the Factored Receivable transactions - kind of like a holding/accrual account manages the CC payments (?) - Eyh?

@JoanSerr I would only set up a new bank code for the payments received directly by the factoring agent and tie the bank code directly to the liability account rather than a cash account.. This way, you reduce the liability when reducing the AR balance. When the agent gets paid, 100% applies to the invoice balance. If you deferred the factoring fees until the customer payment is received, you can record 2 GL lines to the receipt transaction that offset one another to recognize the fees and reduce the deferral. I'm assuming that when you received the advance from the factoring agent you had something of the nature of: $900 cash (dr) $1000 factored AR (cr) $200 factoring fees (dr) (either recognized all at once or deferred and recognized when payment is received.)

Factored invoice sold- Cash received through journal entry (Cash acct with offset to FIS-Advances acct) Payment processed through AR CR entry. Deposit is for the amount in ""excess"" of the fee and factored amount received/advanced. Accounting for the fee through added disbursement line to 'Fees' acct and another disbursement line added for the amount of Cash Advanced on this invoice. My terminology may be a little off - but I think I got the concept down. Thank you.

Personally, avoid GJEs. All can be done in Cash Receipts. Think of the Factoring Company account as just another bank statement (i.e. bank code).

Two past employers ago, we did extensive factoring and it worked, but I don't think our method was the best. I think @BobPfahnl has the right idea: Keep it as simple as possible. The most key ingredient is to pay your customer invoices as if they paid you directly. Then apply the G/L portion as part of that entry to show fees, nets, etc. When you receive the cash from the factor, you'll want to do another cash receipt to the proper g/l code, etc.