What is factoring Invoice and how can you generate it?
Last modified 7/13/2020 6:13:19 AM EST | Added by TruckLogics Team

Applicable To
Fleet Managers Drivers Leased Operators Owner Operators Brokers

Invoice factoring is an act of assigning a third-party business to convert all your outstanding invoices into cash. The company that buys your invoice debt is called a factoring company. The factoring company pays you an amount equivalent to what the invoices are worth, minus a fee (in percentage or dollar). The benefit of factoring is that you get paid sooner.  
 
To factor an invoice, it must have a term of 30 to 90 days. Then, under Factoring Details of the invoice page, select a Factoring Company, enter the Factoring Rate, and select ‘%’ or ‘$’ on how you like to pay the fee to the factoring company to generate a factoring invoice. You can set a company as your default factoring company and generate all the factoring invoices under that company. 
 
Here's how you factor an invoice:

  1. Go to Accounts >> Invoices >> Add Invoice or the Invoice tab under a dispatch.
  2. Under Factoring Details, choose Yes to invoice for a factoring company.
  3. Add or select a Factoring Company
  4. Enter Factoring Rate and select ‘%’ or ‘$’ on how the rate to be calculated.
  5. Click Generate Invoice

 Here’s an example of how factoring invoice works:

Let’s say your customer owes you on a $20,000 invoice, payable in 60 days. So you factor that invoice to a factoring company. The factoring company advances you 90% of that invoice, or $18,000, and holds the remaining $2,000 as a reserve. Now, your customer pays the invoice, $20,000, to the factoring company. The factoring company takes its factoring fee, $600 (assuming 3%). They pay the balance $1400 of the invoice to you. The total you receive will be $19,400 ($20,000 - $600).

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