Factoring
Factoring is a form of commercial finance whereby a business sells its accounts receivable (in the form of invoices) at a discount.
The business then obtains cash from the factor equal to the face value of the accounts they have sold less a factor's fee.
Effectively, the business is then no longer dependent for their incoming cash flow on receiving payment from their customers.
Cash receipts can take 30-to-90-days, depending on the terms offered to Customers, so businesses should benefit from the acceleration of cash flow.
When debts have been factored in this way, it is usual to ask your Customers to make their payments directly to the Factoring Company. You can do this by printing a factoring message on the invoice.
How to record a Factoring message
Open the Company Details window from the System Control menu: Company Details.
On the Definable tab card, enter the text to be printed in the Factoring Message field.
Save the record.
How to flag a Customer record as being subject to Factoring
Locate the Customer record by selecting the option Customers and using the search to locate the correct record.
Click Edit and enter the word FACTORING in the User Sort 1 field (the second field) on the Sort Key tab card.
Save the record.
Repeat the process for all the accounts that have been factored.
The Factoring message will be printed on any invoices that are produced for this Customer.
Tip: Set the word FACTORING to be a value for User Sort 1 by clicking the search icon alongside the field and editing the list that is displayed.
Then you will just be able to select the value from the drop-down list when you edit subsequent Customer records.
And you will be able to select it on the header of an order for any Customer; just click on the User Keys button and select from the User Sort 1 list.
Note: The use of Sort Keys may be limited depending on your system settings.
How to send Sales Ledger invoices to the Factor
If your Factoring company require you to send all your Sales Ledger invoices to them (so that they can forward them to your Customers with payment details attached) then you will have to create an additional address record for all Customers who will be factored.
The additional address will be that of the Factoring company and the address should be flagged as the default address for the invoice.
Paying a Supplier through a Factor
Your Suppliers may request that you pay a factoring company instead of remitting your payment to them.
The easiest way to do this is to create an additional address record for the Supplier and enter the Name and Bank details of the factoring company on the Bank tab of the Supplier record.
Open the Supplier's record from the Suppliers option, using the search to locate the correct record.
Click the Address icon on the toolbar of the record window and click Insert.
Enter the address details of the factoring company and tick the Remittance option.
Save the address.
Return to the Supplier record, click Edit and click on the Bank tab.
Enter the name of the factoring company in the Account Name field. If a name exists in this field it will be used as the Payee name on cheques and remittances.
Enter the full bank details for the factoring company if they are to be paid by BACS remittance.
Save the Supplier record.