ANSWER ID:9094

Also known as factoring of debtors or cash for receivables, the purchasing of debtors (i.e., invoices) by a 3rd party occurs when a company sells its debts to a 3rd party such as a finance company for immediate cash. This factoring purchase also includes a factoring fee charged by the 3rd party, usually in the form of a percentage fee.

You would handle the factoring process in AccountRight by first creating factoring accounts for the factored invoices and fee. Next, you would close off the debtors to be factored through the Receive Payments window. When you receive your payment from the 3rd party in exchange for the debtors, you'd record a Receive Money entry.

The variety of factors involved in factoring means there's no "on size fits all" approach when setting up AccountRight. The particulars of the finance company's factoring policy, the types of invoices being sold, and the agreed upon payment plan all play crucial roles in the recording process.

Want to learn more?

We might not be experts in purchasing of debtors, but our community forum is a great place to connect with business professionals who are happy to share their insights.