How to Process Factored Debt in Garage Hive
Because this is an accounting issue, please consider sending this documentation to your accountant for approval and/or comments.
Debt Factoring is an external, short-term source of finance for a business. With Debt Factoring, the business raises cash by selling their outstanding sales invoices (receivables) to a third party (a factoring company) at a discount. Here is how to process a factored debt in Garage Hive:
- Suppose you have a customer who owes the company £802, and then you transfer the money to a factoring company, in this case Payment Assist. So, now Payment Assist now owes you £802 and the customer owes them.
In the agreement, Payment Assist pays the company £650, leaving a balance of £152 as its commission; You may now process the balance as the commission.
- To begin, use the Payment Assist Commission item card available in the items list, or create an Item card with this setup; make it a Non-Inventory, and add an Item Category Code (PAYMENTASSIST) to distinguish it from other item category codes. If you have more than one factoring company, create a separate item card for each.
The Posting Details should be: Gen. Prod. Posting Group - FDEBT and VAT Prod. Posting Group - STANDARD. If this is not set up in your system, please contact the support team for assistance.
- After you’ve created the item card, search for Sales Credit Memo in the top-right corner and select the related link.
To create a new sales credit memo, click New from the actions bar.
- In the General FastTab Customer Name field, enter the name of the factoring company, Payment Assist, as the balance is now under the company.
In the Lines sub-page, enter the Item you created as the Payment Assist Commission, Quantity to be one, and the Unit Price as the balance, in this case £152.
To post the amount, select Posting from the actions bar, followed by Post. Before posting ensure that you have added the Payment Terms Code field, under the Credit Memo Details FastTab.
- The balance from Payment assist will now be £0, and the sales/payment to Payment Assist will be £650.
- To apply the amount in the customer account, select the Customer, and click on the amount in the Balance column.
- Select Process from the actions bar, followed by Apply Entries.
- In the lines that are yet to be applied, add the Applies-to ID by selecting Process from the actions bar, followed by Set Applies-to ID.
- When done adding the Applies-to ID, select Process and then Post Application. Click OK in the pop-up window.
- The entries are now applied for Payment Assist, and are no longer open.