Factoring with recourse

For factoring with recourse, LN creates the financial posting described here.

Send invoices to factor

If the invoices are factored with recourse, when you send the invoices to the factor LN makes the following entry to create a provision to repay the factor if the customer should fail to pay:

  • Debit: Invoices Factored
  • Credit: Contingent Liability for Factored Invoices

The amount posted is the net amount factored with the factor. This amount is:

The invoice amount - deductions - credit note amount.

Settle the invoice

When the factor notifies you that the customer has paid, you must settle the factored invoice. LN makes the following entry:

  • Debit: Contingent Liability for Factored Invoices
  • Credit: Invoices Factored
Repay the factor

If the customer fails to pay, your company must reimburse the factor. You must create a credit note for the factor for the amount to be repaid.

If the Create debit notes while repaying check box in the CMG Parameters (tfcmg0100s000) session is selected, LN creates a debit note for the original pay-by business partner. If this check box is cleared, LN reopens the original invoice.

LN creates the following entries:

  • For the credit note for the factor, for the amount to be repaid to the factor:

    • Debit: Contingent Liability for Factored Invoices
    • Credit: Customer Control Account of the Factor

  • For the debit note for the original pay-by business partner:

    • Debit: Customer Control Account of the Invoice-to business partner.
    • Credit: Invoices Factored
    • Credit: Discounts and other deductions

The debit note is created in Invoicing and uses the transaction type defined for debit notes. The following applies to the debit note:

  • You can enter the due date of the debit note.
  • The terms of payment of the invoice-to business partner are used. No discounts apply to the debit note, as the invoice is already past its due date.
  • Realized currency differences are calculated for the period between the date on which the invoices were factored and the debit note date and posted to the Contingent Liability Account and the Invoice Factored account.

For invoices that are reopened without any amount being repaid or settled, LN only creates a correction document and links it to the open entries. LN makes a entry to reverse the entries to the Contingent Liability account and the Invoices Factored account.

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