QuickBooks Reconciliation

How to Reconcile QuickBooks when Factoring Invoices

One of our factoring clients recently asked about the proper way to reconcile QuickBooks or other accounting software when factoring invoices.

“Which is the best way to record an invoice in QuickBooks and correctly keep track of outstanding balances and the factoring rates paid to the factoring company once the transaction is complete? I’ve seen references to several different solutions to this question. I’m getting a bit confused!”

We’ve broken down the reconciliation process for you in three simple steps.

Three Steps to Record A Factored Invoice in QuickBooks

Step 1: Create an Accounts Receivable Account
First, you will want to create an Accounts Receivable Account in the Chart of Account titled “Factored A/R”. All invoices that you submit to your factoring company for funding will need to be created out of this account. Then use the original account for non-factored invoices.

Step 2: Is There a Balance Owed to You?
If you are factoring with Universal Funding, check your eFactor account to view which invoices have been paid. To stay up-to-date, we recommend you do this on a daily basis. In QuickBooks, you will go to Customers Receive Payments and receive the payments for the factored debts but instead of applying the payment to the normal “Undeposited Funds” account, you will post to a new “Other Current Asset” account called “Due from Factor” showing that a balance is owed to you from Universal Funding.

Step 3: Deposit Funds into Checking Account
When you receive funds from Universal Funding or your factoring company, make a deposit into the checking account and choose “Due from Factor” as the “From Account.”

One thing to note: you must use accrual accounting for VAT if you factor debts. If you are still experiencing QuickBooks challenges, don’t hesitate to contact your Universal Funding account representative who will be happy to walk you through the reconciliation process.

RELATED: How to Account for Factored Sales Invoices

Give us a call at 800-405-6035 or a complete rate form. Not only will we address your cash flow needs, but we’ll also make sure you use the proper reconciliation methods to keep your accounting up-to-date.