Factoring without recourse

Send invoices to factor

If invoices are factored without recourse, LN closes the original invoices and creates a new open entry for the factor when you send the invoices to the factor. The document type of the new open entry is Sales Invoice, as the factoring transaction involves a sale of receivables to the factor.

The amount posted is the net amount receivable from the factor, which is the invoice amount minus any deductions that apply to the invoice-to business partner minus any existing credit notes for the invoice-to business partner amount. For this entry, the factoring commission is not treated as a deduction.

LN creates the following entries:

• Debit: Factor Control Account
• Debit: Discount
• Debit: Late Payment Surcharges
• Credit: Customer Control Account

If tax applies to the payments of the original invoice, then the tax amounts are also posted when the original invoice is closed.

LN creates the following entries:

• Debit: Interim Tax on Payments Account
• Credit: Sales Tax Account

Unfactor the invoice

If the customer fails to pay, or for other reasons, you can decide to unfactor the invoice and to repay any received advances to the factor.

If the invoices were factored without recourse, the documents can be unfactored if no amount was received from the factor for them. In this case, the original invoices are reopened and the discounts and other deductions that were posted at the time of sending are reversed. The invoice created for the factor is closed.

The postings are:

• Debit: Customer control account
• Credit: Factor control account
• Credit: Discount/ Late Payment Surcharges